Water regulatory cycle likely to be extended

“Thoughtful change” and “we need to be careful not to spook investors” as well as “we need to get it right” were key messages from the Minister for Natural Environment Richard Benyon’s keynote speech last night at the British Water House of Lords reception. Roughly translated this means that we should not expect significant new policies in the water and environment White Papers due this summer.

It does seem at last that the message on how much harm the five year regulatory cycle inflicts on the water sector is getting through. Water company Chief Executives alongside key suppliers all lined up together to make this message very clear. The Minister did promise action on this. But it is equally clear that there is firm support for having an independent regulator. All the positive lobbying by British Water backed up by hard quantification of the cost and some imaginative ideas on possible solutions have had the desired effect. It is equally clear that there is firm support for having an independent regulator. 

The climate has changed. Consultation is now key in Government and there is real opportunity to shape the future direction of the water industry. But is does require a real commitment to engaging with Government and senior civil servants. and actively working to shape the forthcoming white paper. The water sector can learn a lot from how effectively other sectors have managed this.

Water process safety: you don’t improve what you don’t measure

Photo source: Anglian Water

Virtually every Water Company has safety as its top priority. The water industry has made significant steps forward since the days of the Camelford incident reducing the likelihood of such incidents happening in the future. 

But as the Prime Minister recently said: “Good health and safety is vitally important. But all too often good, straightforward legislation designed to protect people from major hazards has been extended inappropriately to cover every walk of life, no matter how low risk”.

One of the keys to improving safety is measurement. Here the water industry can learn from the chemical industry – an industry that has been at the forefront of developing process safety management. Many organizations that want to improve process safety struggle with defining the right metrics. All too often the emphasis is on lagging indications like accident rates. The chemical industry has lead the way in recognizing that to be pro active on safety its essential to also have some leading indicators.

From a number of discussions with experts in this field, it is clear that there are sometimes differing views on exactly what should be measured and there is acceptance that, in some cases, the measures need to be site and process specific. One thing which is universally agreed, however, is that leading indicators are highly valuable to give an early warning that things could go wrong.

For those new to this subject, the guide from Center for Chemical Process Safety, 'Process Safety - You Don't Improve What You Don't Measure' , is an excellent starting point. Click here for link

Water meters to become compulsory?

Yet again metering water metering is becoming a significant issue. The papers were full over the weekend of stories about Defra accepting the case for basing all water charges on metering as well as the potential for water shortages in the South West after the exceptionally low rainfall in 2010.

The coalition has promised to review water charges and in particular tackle the anomaly of customers in the South West paying the highest water bills in the country. Annual bills are £723 compared with £367 nationally.

But installing meters is expensive, at about £200 a time and there are big issues over how to install meters in buildings that have been turned into flats, an increasing trend in most major cities. It can be very difficult and consequently costs can be excessive.

The debts of the water companies due to unpaid water bills are increasing fast up 20% last year. In London water bills will have to increase significantly to pay for the Thames Tideway tunnel. Further increases on top to reduce bills in the South West and pay for metering will be very unpopular and difficult to sell.

So although installing water meters may sound like a sensible idea to reduce water consumption and ensure people pay for what they use. The prospect of a significant increase in bills will not be an easy message for the politicians to sell. Defra were due to launch a consultation shortly but the debacle over the forest sell off is likely to delay any decisions on water meters.  Expect much talking but little action.

Davos: the energy, food, water nexus

The Davos World economic forum has as one of its major themes the nexus between energy, food and water. 70% of water is used for irrigation while energy is, of course, essential for water distribution. So increasing food production to cope with rising population and demand has huge consequences for water supply. Food and energy prices are on their way up and that is driving investment in new production but what about water?

There is still no real recognition of the value of water in too many parts of the world and that unless it is given a value there will not be investment. The problem is that water is still seen often as a right and that where there is no history of charging for water it is politically very difficult to introduce charging. 

Just look at how difficult it is in Northern Ireland, where the inevitable effect of free water and consequent lack of investment came home with the water shortages that made the headlines over Christmas. Davos has suggested that one of the key levers for action is to introduce: “market led natural resource planning” which roughly translated means being prepared to pay for water.

Until politicians are prepared to grasp this issue – the problems of water scarcity will continue. 

OFT and Ofwat investigate market for organic waste and anaerobic digestion

At first sight the decision by the Office of Fair Trading to investigate the market for organic waste sounds surprising. The investigation was triggered by a request from Ofwat, not because it had competition concerns but because it was concerned that the appropriate incentives may not be in place to encourage anaerobic treatment of organic waste from food scraps from household waste and waste products from the food and farming industry.

Heather Clayton, OFT Senior Director of Infrastructure, said:'Advanced organic waste treatment techniques like anaerobic digestion offer tremendous opportunities to produce clean energy and reduce unnecessary waste. 'We need to make sure that the conditions are right to maximize the potential for these technologies to benefit the UK.'

There is a concern over competition as the water companies may have a regional monopoly and with the dominant impact of transport costs may be able to exploit an unfair market advantage. But perhaps more importantly if the market for organic waste is to develop it needs a more commercial attitude to developing new sources of supply than the water companies have so far shown. This is where Ofwat and the OFT may have a role to stimulate activity. 

Can the UK afford continued water investment?

The recent extreme weather events in Australia have served to highlight the challenges the water industry faces. Severn Trent Water estimates that another £96 billion of investment will be needed over the next 20 years. This is in addition to the £85 billion invested since privatisation.

Is this sustainable, especially with customer debts spiralling out of control?

Energy usage for example has spiralled by a staggering 113 per cent since 1989. Understandably the industry has been wedded to capital schemes and the transport of water to fewer centralised water treatment and wastewater plants with the consequent massive investment in the necessary water mains.

Is there a better way? Certainly the proponents of Sustainable Urban Drainage think so with the focus on local treatment at source. If we are to limit the increase in water bills and generate a truly sustainable water industry there needs to be a radical rethink about whether bulk water supply and largescale sewage treatment is really the best way forward. Should not individual households be encouraged to do much more to supply their own grey water? Certainly with new homes, rain water harvesting should become standard, as it already is in some European countries.

2011 brings the opportunity to drive forward change. A Water White Paper and related Natural Environment White Paper, a review of Ofwat, all promise change. Its important to take this oportunity to deliver a sustainable approach for the water industry, its customers , its investors and the envronment for the benefit of future generations.    

Northern Ireland Water - biting the bullet

The recent water supply problems in Northern Ireland were undoubtably inevitable given the chronic under investment in Northern Ireland’s water infrastructure. Even NIW on their website admit there has been chronic underinvestment and there is a big gap in performance compared to water companies on the mainland.

Water is a very long term businesses (with water mains on average over a 100 years old). But although politicians can delay expenditure, eventually, as the events of the last week have shown the inevitable consequences will result. 

With the ‘blame game’ now starting, this may distract from the real issue of whether the politicians (and the voters who put them there) are prepared to take the tough decision and sanction massive investment in improving the infrastructure. With the public sector spending cut backs, the only realistic way to pay for the investment is to start charging for water. Water is still ‘free’ in Northern Ireland and while the politicians refuse to take the tough decisions on charging its certain that water supply problems will reoccur and politicians (and voters) only have themselves to blame.

Management can't escape blame either, they know the problems that under investment will cause. Its their duty to make sure the risks being taken are explicitly clear. The key to good management is to plan ahead and act early. NIW may not be able to stop problems occurring but that does not excuse poor communication compounded by inadequate emergency planning.