2Reducing demand
31.Demand reduction is the second part of the “twin track” approach. Demand reduction comprises a range of worthwhile activities, some of which fall outside the remit of our Report (for example, improving the water efficiency of domestic appliances). We have chosen to focus here on how water companies and regulators intend to encourage customers to reduce demand.
Domestic consumption targets
32.The first step to reducing demand is to identify current levels of water consumption and then set a target for reduction. Water consumption by domestic customers is commonly measured as Per Capita Consumption (PCC), which is the average litres of water used by each person that lives in a household property per day. Waterwise stated that “targets for personal water consumption have been shown internationally as a successful option in driving forward innovative approaches for water efficiency” and it has advocated that PCC targets be used as the “most appropriate common commitment measure for water efficiency in PR19”.93 The current PCC for England and Wales is 141 litres per person per day.94 Water usage has been shown to vary according to whether customers have a water meter (average PCC of 129 litres per person per day) or not (average PCC of 162 litres per person per day).95 PCC also varies widely by region, with the two extremes being non-metered customers in the South-West region using 198 litres per person per day and metered customers in the Yorkshire region using around 55 per cent of that amount, at 108 litres per person per day.96
33.There were different views on what the PCC target should be. The NIC recommended a PCC of 118 litres per person per day.97 The Environmental Audit Committee recently recommended a PCC of 110 litres per person per day for all new buildings.98 Building regulations are the responsibility of the Ministry of Housing, Communities and Local Government (MHCLG).99 Nicci Russell, Managing Director of Waterwise, told us that “we would like to see all the water companies in England and Wales committing to 100 litres per person or less, within that 25-year water resource management plan period”.100 Ofwat stated that it had “recently commissioned a study of the long term potential for deep reductions in water consumption” which “suggested it is possible to achieve average daily consumption of between 50 and 70 litres per person in 50 years, compared to around 140 litres today, without a reduction in the level of utility or quality of water use”.101
34.Rachel Fletcher, CEO of Ofwat, believed that the 2019 draft water resource management plans (WRMPs) published by water companies were “really lacking in ambition” on the demand side, with “quite low ambitions around reducing per capita consumption, even over a large number of years”.102 She considered that “there are really huge opportunities for the companies to do more” and “in the next price review period [PR19] we will ask every company to make a performance commitment around reducing per capita consumption”.103 Waterwise identified “a wide variation in PCC ambition” between water companies and suggested that “Ofwat could require a PCC reduction of up to 22% - between 0 and 28 litres per day”.104
35.Defra’s 25 Year Environment Plan committed to working with industry to set “an ambitious personal consumption target and agree cost-effective measures to meet it”.105 Sebastian Catovsky explained that Defra “would like to” publish an ambitious target in the autumn.106
36.Per capita consumption (PCC) targets provide an incentive for water companies to help consumers reduce demand for water. Ambitious targets can also lead to more innovation in the water industry.
37.It is disappointing that the Government has not yet supported a specific PCC target. A cross-Government target for PCC reduction over the next 25 years should be published, alongside plans for how the target could be achieved.
Metering
38.Water consumption is measured using water meters. Knowing how much water is used can incentivise customers to use less, and therefore reducing demand for water will partly depend on the use of water metering.107 As well as reducing water consumption, meters can help water companies and customers identify where leaks are happening.108
39.Water meters may be fitted throughout the water supply system, but our Report primarily focuses on meters within domestic premises. The main factors affecting whether properties are metered include customer choice, the age of the property and whether the property is in a designated area of water stress. All homes built after 1990 have water meters and bills reflect the amount of water used, whereas water bills for homes built before 1990 may be based on the rateable value of the property.109 Domestic customers cannot change the rateable value of their property and can only opt to be metered for their water use instead. Water companies must install a water meter free of charge at a customer’s request.110 After a meter is fitted, customers can usually choose to revert back to an unmeasured charge within 12 months.111 Water companies in areas of water stress are allowed to introduce compulsory metering as part of demand management.112 In 2013, the following water company regions were classified as areas of serious water stress: Affinity Water; Anglian Water; Essex and Suffolk Water; South East Water; Southern Water; Sutton and East Surrey Water; and Thames Water.113 Meters can also be introduced under other, limited circumstances, such as if the property has an automatically filled pond or swimming pool or when there is a change of occupier.114
40.Water metering in England increased from 17 per cent in 1999/2000 to 51 per cent in 2016/17.115 Current levels of domestic metering vary from 85 per cent in the Southern Water region to 40 per cent in the region covered by United Utilities.116 Southern Water, the first company to implement a “universal metering programme”, has found that “customers reduced consumption by up to 16.5%” and that “average PCC is 15% lower”.117 Southern Water now has a target to “reduce average PCC to 100 litres per day by 2040”.118 Metering has also generated data on consumption, which is being used to “target water efficiency campaigns in areas of above average consumption”.119 CIWEM explained that most companies in water stressed areas, such as Southern Water, were using their powers but “outside such areas, meter penetration remains relatively low, with the average at around 53%”.120 However, future projections anticipate metering potentially increasing to 61 per cent by 2020, and 87% per cent by 2045.121
41.Although there was widespread support among witnesses to our inquiry for increased metering, there were mixed views on whether metering should be compulsory. Mel Karam, Chief Executive Officer of Bristol Water, considered that:
the focus, at least for the next few years, should be on customer education and water efficiency. There is a place for compulsory smart metering later on but unless we have the customers and the public on our side that water is precious, water should stay in the environment and that we should reduce water use, compulsory metering may have a negative impact and backfire.122
42.CIWEM stated that “households that have chosen to have a meter tend to […] save money on their water bill, largely because they have lower than average occupancies and/or consumption”.123 CIWEM also considered that “comprehensive metering coverage in all water company areas […] should be permitted” but added that “this should also be accompanied by robust schemes to deal with financial hardship and to smooth bill increases for segments of society for which the impacts of moving to a metered supply would be particularly significant”.124 Some support already exists, such as Watersure, which caps bills for metered customers at the average metered bill amount for their area, if the customers meet certain criteria such as receiving benefits or needing to use a large amount of water for medical reasons.125 The use of such schemes to help customers transition to metering was generally supported by water companies.126
43.Southern Water advocated universal metering as “the most cost-effective method of reducing household consumption”.127 The National Infrastructure Commission (NIC) has recommended that Defra “should enable companies to implement compulsory metering by the 2030s beyond water stressed areas, by amending regulations before the end of 2019 and requiring all companies to consider systematic roll out of smart meters as a first step in a concerted campaign to improve water efficiency”.128 Rachel Fletcher, Ofwat, stated that Ofwat has “a number of incentives on the companies that might drive them to look again at the case for metering”, including the “performance commitment around reducing per capita consumption” in PR19.129 Rachel Fletcher added that Ofwat expects companies to be “talking to their customers about metering” and “helping customers understand the benefits that can come from water meters”.130
44.We consider that using meters to ensure customers pay for the water they use, rather than basing bills on the outdated system of rateable values, sends a strong message to customers about the value of water. There is strong evidence that metering helps to reduce water use and to detect leaks.
45.Allowing compulsory metering only in water-stressed areas causes regional disparities that are inappropriate given the national need to conserve water. We endorse the recommendation of the National Infrastructure Commission that Defra should amend regulations by the end of 2019 to allow all water companies to implement compulsory metering, using smart meters. Water companies should use these powers to help achieve ambitious PCC reduction targets, while also engaging customers about the value of water and the benefits of using a meter. Support for economically vulnerable customers should be strengthened should metering lead to significant bill increases.
93 Waterwise (RWI0019) para 20; Correspondence from Waterwise to Ofwat, Ofwat consultation on Delivering Water 2020 - consulting on our methodology for the 2019 price review, 30 August 2017
94 Figures for April 2017 to March 2018; Discover Water, The amount we use, accessed September 2018
95 Discover Water, The amount we use, accessed September 2018
96 Discover Water, The amount we use, accessed September 2018
97 National Infrastructure Commission, Preparing for a drier future: England’s water infrastructure needs, April 2018, p 25
98 Environmental Audit Committee, Ninth report of session 2017–19, Heatwaves: adapting to climate change, HC 826, para 99
99 Ministry of Housing, Communities and Local Government, Our policies, accessed September 2018; The Chartered Institution of Water and Environmental Management (RWI0021) para 50
100 Q 59
102 Q 260
103 Q 260; Q 249
105 Department for Environment, Food and Rural Affairs, A Green Future: Our 25 Year Plan to Improve the Environment, January 2018, p 70
106 Q 347
109 Rateable values are an assessment of the annual rental value of a property and were last fully updated in 1973. They are fixed and cannot be changed. Rateable values are used by water companies to calculate unmeasured water and sewerage charges. See: Ofwat, Unmetered customers, accessed September 2018
110 Installation at the customer’s request can be denied if the property’s pipe work does not allow it or the installation cost is unreasonable; Consumer Council for Water, Rateable values, accessed September 2018
111 Ofwat, Water meters - your questions answered, 2013, p 10
112 Department for Environment, Food and Rural Affairs, Water stressed areas: 2013 classification, August 2013
113 House of Commons Library, Water meters: the rights of customers and water companies, February 2016
114 House of Commons Library, Water meters: the rights of customers and water companies, February 2016; Qq 362–369; Dr Thérèse Coffey (RWI0044)
122 Q 142
125 Citizen’s advice, Watersure scheme – help with paying water bills, accessed September 2018
126 For example, Qq 145–146
128 National Infrastructure Commission, Preparing for a drier future: England’s water infrastructure needs, April 2018, p 12
129 Q 249
130 Q 249
Published: 9 October 2018