Commission to investigate Thames Tunnel

Photo source: Hammersmith and Fulham Borough Council Lord Selbourne and Councillors at Commission launch

 An independent commission is to study the case for the massive Thames Tunnel. The tunnel is Thames Water’s preferred solution to reduce sewer discharges into the Thames and avoid EU fines. But it is hitting increasing opposition from local residents, councils and MPs.

The commission will be led by Lord Selbourne. He said: ”The key question is whether this multi – billion pound scheme is the best solution for making the Thames cleaner or whether there are sensible alternatives that are cheaper, greener and less disruptive”. Thames Water’s Chief Executive, Martin Baggs, recently revealed that the sewer’s initial £3.6 billion price tag  - initially costing customers £65 per year for life – was based on 2008 figures and ‘will inevitably increase’. 

The concern has to be that the Water Companies have a strong incentive to favour capital intensive rather than operating cost schemes. One of the reasons for this is that any new capital expenditure increases the Regulated Capital Value of the business and therefore increases returns to shareholders. This is one of the main reasons why investors like Mcquarie bank are able to achieve returns of nearly 12% for their shareholders. Ofwat is looking at the capital cost, operating cost balance and in the view of this blog needs to take action to redress the balance. 

Thames Tunnel goes to IPC

Photo source: Thames Water

The decision announced this week that the Thames Tunnel will be referred to The Infrastructure Planning Commission (IPC) is perhaps surprising. The 2008 Planning Act does not list sewers as nationally significant infrastructure projects so it has needed a decision by a Minister to ensure its covered.

Referring the planning application to the IPC has obvious benefits to the Government as it provides a fast track way of making decisions and keeps Ministers one step removed. It will require the National Policy Statement for wastewater, (due to be issued in draft this autumn) to be revised to provide guidance for sewer projects.

The involvement of the IPC may not make it any easier for Thames Water to gain planning permission. The 2008 Planning Act requires applicants to demonstrate that they have considered and consulted on alternatives. It also gives power to local councils to judge whether the applicants consultation process has been adequate.

This is likely to prove controversial as many local councils are opposed to the huge cost of the tunnel scheme and are already saying that Thames Water has not adequately looked at alternatives. So the involvement of the IPC may actually slow down the tunnel project and lead to considerable further debate on the best way forward.