Water companies’ final determinations risk insufficient investment being made in water efficiency and demand management programmes to adequately maintain and improve the resilience of supplies.
That is the concern raised by efficiency champions Waterwise in its submission to the Competition and Markets Authority (CMA) regarding the redetermination of the business plans of Anglian, Northumbrian and Yorkshire. The companies requested Ofwat to refer their business plans to the competition watchdog after rejecting the water regulator’s assessment of their PR19 plans.
Waterwise said its concerns pertain to the appellant companies but extend more broadly across the wider sector in England and Wales.
Nicci Russell, head of Waterwise, told Utility Week about their worries: “We are concerned at the mismatch between funding and ambition on water efficiency across the sector – not just for the CMA companies. We have raised this with Ofwat as well as the CMA and would like this to be considered in regulatory monitoring and action in-period.”
She said cuts to water efficiency budgets are “a false economy” because greater water efficiency actually saves people money on their water and energy bills.
“And in terms of marginal cost, water company spend on water efficiency measures, when supported by government policies, can be more than 100 times more cost effective per litre, as Water UK’s research has shown. The penalties for water efficiency targets are less than those for leakage, and faced with the significant reduction in overall funding which Anglian, Northumbrian and Yorkshire have raised in their CMA submissions, water efficiency is again falling down the pecking order like in the bad old days.”
The group urged the CMA to consider the merits of water efficiency schemes as a way for billpayers to save money by saving water, saying these efforts would be put at risk if not funded properly.
Waterwise said companies informed them they will have to scale back metering programmes, engagement programmes and the provision of water saving devices because of the lower spending allowed in the final determinations.
Metering programmes have been shown to lower water use by between 12-22 per cent compared to customers that pay by rateable value, but companies have told Waterwise they may be forced to prioritise areas that carry greater penalties for underperformance – such as leakage – and accept the penalties for missing targets on reducing per capita consumption (PCC).
Anglian indicated to Waterwise that would scale back its efficiency programme planned for AMP7 and reduce its smart meter rollout from 1.2 million homes to around 860,000 because of funding. This would result in greater abstraction at the anticipated rate of an extra 7 million litres per day by 2025.
Similarly, Yorkshire will have to cut its meter rollout programme including proposed smart meter installations.
“Companies are saying that this isn’t what their customers wanted,” Russell added. “And of course, it’s customers and the environment that bear the impact when water companies aren’t sufficiently resilient.”
Waterwise cited research it undertook into water efficiency labelling that indicates households could save around £40 per household per year on utility bills by cutting water consumption by around 20 per cent.
In light of such potential savings, Waterwise said it was therefore ironic that a stated commitment by Ofwat in the final determinations to reduce bills beyond what was set out in draft determinations may put at risk water efficiency programmes that can deliver savings of a similar magnitude.