Take discovering the value of water. Part of the aim of that change is to give a financial dimension that will incentivise efficient use of water, but the bottom line is that the price of water will go up where it is scarce. That may not materially affect water prices – the water cost of the water itself can be a relatively small component of the total water price, with fixed asset costs more important. But we don’t know that until we discover how the value of water varies.
In fact, there could be all kinds of diverging approaches to water across the country. The government has encouraged water companies to take individual approaches to managing affordability, for example.
There are two issues that need to be borne in mind by water companies.
First, we need to prompt public debate so people understand the implications of the White Paper. Customers may well accept some variation in the value of water, but what are the limits to that acceptance?
We have varying water prices at the moment and the experience has not always been a happy one. The example of South West Water should be in everyone’s mind. The cost burden in the region rose, and local organisations and MPs fought hard to force the government to give a unique discount to customers. But in the long term we can’t end up trapped in a series of ad hoc payments.
Second, the water sector should start thinking more about its approach to public affairs.
A water sector that has more varied participants, is ready to respond to natural variations, and offers innovative solutions to affordability and demand-side management is likely to be more efficient – but it will also be more complex for customers to deal with. They need to see that new industry as it takes shape so they get the best chance to provide input and accept changes. But existing water companies will still be highly visible and, fair or not, they will be forced to inform and respond to public concerns.
The energy industry has concluded that it can’t take a public “not my responsibility” stance when the mud is flying – it just doesn’t work. The water industry should learn from that experience.
Janet Wood
This article first appeared in Utility Week’s print edition of 13 January 2012.
Get Utility Week’s expert news and comment – unique and indispensible – direct to your desk. Sign up for a trial subscription here: http://bit.ly/zzxQxx