Dipping into the California drought

A few months back I presented with a colleague about motivations for university academics to engage with ‘massive open online courses’ (MOOCs). This was at the Coursera Partners Conference in Newport Beach, California (Coursera is the platform we worked with to share our water and sanitation MOOC at the University of Manchester) and this was their annual event for instructors, media teams, instructional designers and course administrators to meet and share insights with each other. It was also where Coursera presented some new platform features, mainly helping with their apparently desired transition to more courses being available at any time, ‘on demand’ to learners all around the world.

Photo: Presenting on motivations for academics to engage with MOOCs, Coursera conference 2015, California. Source: Coursera.

Photo: Presenting at the Coursera conference 2015, California. Source: Coursera.

I found the event and setting very inspiring. By its very nature it was a magnet for some fascinating, passionate people – academics committed to ‘universal access to the world’s best education’ at low or no cost – and innovators in instructional design, course delivery, crowdsourced ‘citizen science’ and many were thought leaders in their fields. It was the largest, most concentrated gathering of creative, energetic and optimistic academics I’ve ever attended.

Photo: Audience at the Coursera conference.

Photo: Audience at the Coursera conference.

For my panel I shared the floor with several ‘star’, early-adopter, near-evangelist MOOC instructors, including the legendary ‘Dr Chuck‘ (Charles Severance) who’s delivered software/programming courses on Coursera since it launched, and even has tattoos of each of the platforms he’s on!

Photo: After-panel Q&A with MOOC star, Dr Chuck.

Photo: After-panel Q&A with MOOC star, Charles Severance (a.k.a. Dr Chuck). Source: Coursera.

Photo: Dr Chuck's platform tattoos! Source: Coursera.

Photo: Dr Chuck’s platform tattoos! Source: Coursera.

The whole event was bursting with a ‘can do’ attitude and outlook. I haven’t re-adjusted since returning to the UK. (A close friend who spent much time in California captured how I feel by likening returning from California’s disposition and climate back to the UK as being like ‘swimming through treacle’!)

Photo: Venue for the Coursera conference, Newport Beach, California.

Photo: Venue for the Coursera conference, Newport Beach, California.

I’ve spent many years researching and teaching sustainability issues. I thought I’d positively loathe Los Angeles and its infamous urban sprawl. I also now drive an electric car so felt even more alert to be headed to the ‘car city’, expecting smog and over-the-top consumer culture… The reality was anything but. I was positively entranced by the beauty of the place and approachability of the people, and can’t wait to go back.

Beyond all the palm trees, blue skies, expansive Pacific ocean vistas, immaculately manicured verges, positive people and shining facades though are the looming contradictions between population, climate and water resources in California. Other than a brief mention in an opening address, no one I met or heard speak at the Coursera conference mentioned the state’s daily-worsening drought conditions…

Photo: Romantic water aesthetics in California, overlooking the magnificent Pacific and Ocean. Photo: Scot Corrie.

Photo: Romantic water aesthetics in California, overlooking the magnificent Pacific and Ocean. Photo: Scot Corrie.

The collection of videos below show the dramatic challenges for water resources for the ecosystem, the landscape and amenities; show celebrities being ‘drought shamed’ for their profligate water use; and discuss conflicts between agricultural, industrial and domestic water users that new policy efforts are trying to mitigate…

The story below about wealthy residents in Montecito bringing in truckloads of water in the dead of night – ostensibly oblivious to the socio-environmental situation around them – really struck me the most though; I wonder if these residents next visit nearby Butterfly Beach and try to hold back the tide…?

Voluntary, grant-supported replacement of water-thirsty grass lawns with sparser, drought-tolerant shrubs is one positive response to the drought in California, as seen in this National Geographic clip:

However it’s worrying to see a lack of awareness of the sky-high cost of building long pipelines across the country to try to address the drought. Actor William Shatner has been in the news promoting this idea, a costly approach with which China and Australia have also toyed in recent years:

What’s certain is that the coming year will be a challenging and revealing time for water policy in this part of the world, if indeed California has only ‘a year’ of water left as these sources above seem to suggest…

Duncan Thomas

Rewarding realistic water and sanitation in games?

We’re gearing up again for the next part of our ‘massive open online course’ (MOOC). It’ll be Part 2 of our Water Supply and Sanitation Policy course, this time looking at which policy interventions have worked, having covered baseline water and sanitation conditions in Part 1. One of things that has come up again is working out exactly how Dale and I should talk about sanitation, in particular; it remains one of those things not really touched upon in polite conversation.

Generally it’s rare that we see water and sanitation talked about much more broadly, let alone realistically depicted, in much of our popular culture too. This point even takes us right back to one of our first gripes here at Waterstink, on how ‘period dramas’ often omit the harrowing sanitation conditions of their times.

This reflection back got me thinking further; these days games are a widespread and incredibly lucrative part of popular culture… so how do they represent water and sanitation conditions? Do they do it well? Or like costume dramas, do they omit or overly romanticise things?

Gaming is now a massive global industry with tens of billions of US Dollars annual revenue, and has eclipsed film industry in terms of economic scale (in the UK, in the US, and globally). Hollywood actors do voiceovers (LOTS of them!), cameos or full-blown roles for them. The biggest games sell millions of copies. In games it’s very common nowadays to interact with astonishingly detailed and/or realistic renderings of all kinds of past, current and future day settings. For example here’s a fairly recent take on an 18th century Caribbean environment from the game, Assassin’s Creed Black Flag:

Photo: Remarkable aesthetic beauty of water, captured in Assassin's Creed Black Flag.

Photo: Remarkable aesthetic beauty of water, captured in Assassin’s Creed Black Flag.

Pretty, isn’t it? And it’s got water in it too! But do games ever go further beyond this kind of aesthetic use of water, as a kind of attractive backdrop? Do we ever get to see more detail about these aspects that are basic to human survival? Are water and sanitation integrated into the working design of all the dynamic, high resolution detail that has become so common in the games we might play these days?

From my limited experience, I’ve found that typically the character you play – in most genres of games where you can interact with an environment – is capable of doing many things. You can walk, run, crouch or crawl, jump, shoot or hit stuff, and sometimes you might eat… or even drink (albeit to regain ‘health’)… but very rarely in a game do you ever go to the toilet. In fact you might even struggle to find a toilet depicted in your specific game environment.

Well, what does that matter? Should we change this status quo? Could we make water and sanitation more a talking point through this immensely popular medium?

With the scale and complexity of global challenges around water and sanitation that we all face, I think we should. Along that line of reasoning, as a bit of a diversion from ‘normal’ posts here at Waterstink, I’m going to imagine there are awards for realistic water and sanitation in games, and look at just a few recent, more or less high-profile games that I think deserve special mentions in this regard. So let’s start with the water-and-sanitation-realistic-depiction-award for…

Best rural water and sanitation in a game

Not in the vanguard, but doing reasonably well here is the quasi-realistic, Himalayan-y, rural-y setting of popular, cross-platform bestseller Far Cry 4 (with 7 million sales as of December 2014, and a 85/100 score on Metacritic). Here and there Far Cry 4 does depict some examples of rural drinking water infrastructure:

Photo: Water taps in the game Far Cry 4.

Photo: Water taps in the game Far Cry 4.

This choice of piped water infrastructure is admirably quite realistic for the game’s mountainous setting. You could image a gravity-fed, piped water system from mountain springs actually being used here. In fact it looks very similar to a system that Dale showed in-class to our students last week at the University of Manchester, taken some a few years ago, in Bolivia:

Photo: Water taps at the end of a gravity-fed piped system in Bolivia. Source: Dale Whittington.

Photo: Water taps at the end of a gravity-fed piped system in Bolivia. Source: Dale Whittington.

Far Cry doesn’t do quite so well with sanitation facilities though. The most you’ll see is some vague ‘huts’, sometimes accompanied with the sound of flies, that you can’t enter, and that are probably toilets. All in all they don’t really reveal anything at all about what are probably very basic sanitation conditions in this (stylised) part of the world:

Photo: A probable toilet in Far Cry 4.

Photo: A probable toilet in Far Cry 4.

Whatever they might look like inside, most likely these huts are not examples of improved sanitation facilities, such as a ventilated improved pit (VIP) latrine.

Best mega-city water and sanitation in a game

Now we move to modern day Hong Kong depicted in the remastered, Sleeping Dogs Definitive Edition. Here there are toilets and sinks that you can use (albeit not pictured here in use for the sake of good taste, but the mere fact that you can use them causes my little one endless amusement – and led to much in-game handwashing afterwards for good practice!):

Photo: A toilet in a Hong Kong apartment, from Sleeping Dogs.

Photo: A toilet in a Hong Kong apartment, from Sleeping Dogs.

Good as this is, interactive toilets and sinks are about it though for Sleeping Dogs; no large-scale water or sanitation infrastructure in the actual city of Hong Kong seems to be shown.

Runner-up award: Sewers are not really for that kind of thing!

Sewers, oddly, have been a bit of a mainstay – almost obsession – for games for many years now. They are a popular game environment design choice in order to shortcut you from one game area to another, sometimes as subterranean living spaces for freakish characters, or simply a stealthy way to sneak you into some secure location. Sadly they are often shown unrealistically. Often they are laws-of-physics-defyingly large, like in the game Deadlight:

Photo: An impossible sewer structure in the game Deadlight.

Photo: An impossible sewer structure in the game Deadlight.

Let’s contrast this with a Thames Water picture of a typical sewer:

Photo: Three sewer flushers down a London sewer. Source: Thames Water.

Photo: Three sewer flushers down a London sewer. Source: Thames Water.

Now I know some storm drains and sewers are a bit larger than this one shown, but still Deadlight’s liberty with structures doesn’t exactly educate and inform younger people about the scale and extent of our underground sanitation infrastructure, does it?!?

An example of a gaming depiction of sewers as labyrinthian sneaking and traversal mechanisms is found in fungal-zombie, post-apocalyptic, character- and story-driven, bestseller The Last of Us (about 8 million copies sold up to 2014). Here are some shots of this part of the game in action:

Photo: Storm drain outflow in The Last Of Us (possibly a combined sewer outflow?).

Photo: Storm drain outflow in The Last Of Us (possibly a combined sewer outflow?).

Photo: The Last Of Us game character Joel here is scratching his head... he will need to in a few moments when he sees the size of the sewer structures just in front of him!

Photo: The Last Of Us game character Joel here is scratching his head… he will be doing a lot more of that in a few moments when he sees the remarkable size of the sewer structures in front of him!

Photo: Some kind of giant underground storm drain/sewer chamber in The Last Of Us.

Photo: Joel then enters some kind of giant underground storm drain/sewer chamber in The Last Of Us.

Both The Last Of Us and Deadlight feature the ‘eccentric’ (to say the least!) character(s) using sewers/storm drains as places to live. Here’s an example note left behind by one such sewer ‘resident’ in The Last Of Us:

Photo: Even given there's been an apocalyptic event, I still doubt Ish is enjoying the sewers THAT much!

Photo: Even given there’s been an apocalyptic event, I still doubt incidental game character, Ish will be enjoying his life much as a ‘mole-man’ in these sewers!

Best representation of water and sanitation in a game

The best-picture ‘award’, if there were such a thing, for overall ‘most realistic representation of water and sanitation issues in a video game’ (technically, sub-category ‘urban’) would undoubtedly go to epic, sweeping, open-world, grime-n’-crime ‘simulator’ Grand Theft Auto V. It’s oddly heartening for me to find that probably the biggest selling games of all time (1 billion USD in sales in its first three days45 million copies distributed to retailers so far) takes a comprehensive view of (urban) water and sanitation infrastructure. Even more than that, it hints at some global water challenge issues here and there.

First of all, there are toilets in GTA V:

Photo: A toilet in GTA V. Not usable directly, but at least it's there...

Photo: A toilet in GTA V. Not usable directly, but at least it’s there…

There are also reservoirs and dams:

Photo: A reservoir in the game, with valve tower to the right and some possible recreational infrastructure to the left. In the background is the 'Vinewood' sign - GTA's take on Hollywood!

Photo: An in-game reservoir; valve tower to the right and some recreational platform to the left. Just visible in the background is the game’s ‘Vinewood’ sign – that’s GTA’s take on Hollywood…

Photo: A reservoir in GTA V.

Photo: Another large reservoir depicted in GTA V.

Photo: The dam holding back this reservoir in GTA V.

Photo: The dam holding back this reservoir in GTA V.

Some areas of GTA seem to indicate the raw water supply is under stress, such as in the drying up waterways leading away from the above dam:

Photo: Water flow drying up in GTA V; dam in the background.

Photo: Water flow seemingly drying up in GTA V; dam shown in the background. I get a sense here that the artistic design is suggesting that the river flow here may have been far more substantial in the past…

If you look you’ll also find rubbish discarded around the above river bed (presumably a take on the Los Angeles River) hinting at pollution issues.

Most impressive of all – and now I say this realising that you may find the actual content and gameplay of the whole GTA series quite objectionable – there’s a large wastewater treatment plant in-game that you can fully walk around and explore:

Photo: Wastewater treatment works in GTA V.

Photo: A wastewater treatment plant in GTA V.

Photo: You can climb up and dive right in some of the wastewater assets... not that you'd want to!

Photo: You can even climb up and dive right into these wastewater treatment assets… not that you’d want to!

Photo: Treatment lanes at the wastewater plant in GTA V.

Photo: Treatment lanes at the wastewater plant in GTA V.

The city storm drain system is also referenced directly in GTA’s stylised take on LA, ‘Los Santos':

Photo: GTA's stylisation of the Los Angeles River and associated storm drain systems.

Photo: GTA’s stylisation of the canalised Los Angeles River and associated storm drain systems.

Photo: More iconic landmarks re-imagined in GTA's stylised 'Los Santos'.

Photo: More iconic scenery along the Los Angeles River as re-imagined in GTA’s stylised city of ‘Los Santos’.

Photo: Some social commentary in GTA too around this infrastructure...

Photo: Some scope for social commentary in GTA around this area too…

Frankly this level of attention to the actual workings of a city, and to bring out of the shadows the typically flush-and-forget, out-of-sight-and-out-of-mind aspects of urban life, is really commendable. What your average gamer thinks of these inclusions in GTA’s virtual take on Los Angeles, I’m not sure. But I think there’s potential here for participatory discussion and education about planning water and sanitation infrastructure, and about it and we need to adapt to and mitigate climate change factors (I could even see this kind of gamification of water and sanitation participatory planning, of sorts, as a prime candidate for MOOC-related materials!).

Overall I’m happy that gaming, as big and popular as it now is, does sometimes show water and sanitation infrastructure. The level of representation at the moment is a start only, of course. Many people may also shrug and ignore these admirably detailed efforts. But for me I think games have come a long way – and even show a positive way forward of sorts – by not overtly hiding and explicitly overlooking these assets that after all are so vital to our shared life and future together on this planet.

Duncan Thomas

Thames Water, Network Rail argue over Farringdon flooding

From time to time I often feel the urge to comment on rail matters. There are often lots of overlapping issues with the large network infrastructure of the water and sanitation sector, policy, regulation etc. etc.

In a fairly dense city like London, where the networks of both utility services criss-cross and interact with each other to a very high degree, the overlap is quite noticeable. One example of this is playing out in the UK media right now. The BBC has reported it as follows:

  • 23 January – a Thames Water water main burst, flooding a tunnel connecting St Pancras International and Farringdon train stations in London, making it impassable for many trains;
  • 26 January – Thameslink Bedford-to-Brighton rail line operator says it is unable to run any trains in London until the problem is fixed; five of its trains are damaged by flood water;
  • 29 January – Network Rail says it will issue Thames Water with a ‘multi-billion pound’ bill, after 1,000 cancelled trains and 133 hours of delays, having ‘exhausted’ its patience with Thames Water;
  • 29/30 January – Thames Water and Network Rail begin what the BBC described as ‘tit-for-tat corporate wrangling over whose fault the disruption is and whose responsibility the flooded tunnel was’. Apparently flood water from the original burst mains, and subsequently identified further leaks, was unable to drain away due to poorly maintained drains for which Network Rail is responsible;
  • 30 January – Thameslink service in London resume, after almost a week of disruption to trains.

In pictures, here’s the flooded tunnel:

Photo: Flooded Clerkenwell tunnel between St Pancras and Farringdon, London. Source: BBC (via Govia).

And here’s the blocked Network Rail drains that Thames Water claim exacerbated problems, and have apparently been an identified issue since as early as 2007:

Photo: Blocked drainage apparently under Network Rail’s responsibility. Source: Thames Water.

None of this wrangling will impress passengers affected by the delays, I imagine! It’s also symptomatic of the fragmented responsibilities and accountability for planning, investments and maintenance across different utility sectors. This is permitted by the scattered ownership and operation of these two privatised utility sectors and their regulatory arrangements.

The ideal outcome here would be some requirements for cooperative, long-term actions across these (and other related) utilities and their regulatory frameworks. The media so far doesn’t seem to have stressed this vital aspect though…

Duncan Thomas

Irish Water is in the news again

Irish Water has been in today’s news again after being in and out of the headlines these past few months probably a lot more than it would have liked.

The ‘semi-state’ company has remained controversial since its incorporation in mid-2013 and particularly since its phased take-over during 2014 of responsibility for 34 local authorities’ provision of water and wastewater services, and especially its 1 October step to introduce direct charging for water accompanying with water metered installation – a move widely understood as making people pay twice for their water (i.e. generation taxation before -> tax plus direct charges after).

On its website Irish Water justifies itself as follows:

‘Water is one of our most valuable resources. It has shaped our landscape, dictated the location of our towns and cities, protected our health, and fuelled our economic development. However, clean water is expensive to both produce and manage. … Our current funding model is simply not sustainable. Despite the good work of the Local Authorities, much greater investment nationally is needed to address weaknesses in the water system, including high leakage rates, varying quality standards, and disruptions to supply.’

It also stresses Ireland’s comparative context:

‘Ireland is currently the only country in the OECD that does not have domestic water charges.’

There is no mention though of direct water charging being part of the Irish government’s deficit reduction actions after an international bailout following the global 2007/2008 economic crisis.

I must say the first thing that sprung to my mind after hearing all these Irish water news stories was that aspects of this case are strikingly similar to a challenge Prof. Dale Whittington poses to our University of Manchester students (in our class on water and sanitation planning and policy each year). There we take the Egyptian water tariff reform situation. This has similar features of (i) historical under-investment, (ii) historically low and/or not very transparent water charging, and (iii) pressure from international financial institutions. We ask our students to plan a multi-stakeholder communication programme for pricing reform. Generally they come to appreciate it’s a challenging task, even more so in a politically turbulent setting like Egypt!

But even given how complex this task is, it’s difficult to imagine getting things as wrong as they seem to have gone in the Irish case. Today’s news coverage in the Irish Independent is indeed in this vein, quoting Irish Government Chief Whip Paul Kehoe as saying:

‘Irish Water bosses failed to send “warning signals” to the Government that could have prevented the fiasco which has engulfed the company …’

‘… the management of Irish Water took on way too much and should have been giving warning signals to the Government earlier. That didn’t happen.’

‘The government wasn’t given warning signals earlier of the pressure areas.’

Revelations that over 50 million Euro was spent by Irish Water on consultants in 2013 started 2014 badly, so any reform communication strategy – if indeed there was a ‘strategy’ at all – was on shaky ground to begin with. It’s also clear your communication ‘strategy’ needs a serious change of course when in addition to mass protests (on 10 December, and earlier) you find musician Sinead O’Connor blogging about Irish Water charges and Russell Brand making Irish water-related Trews videos:

Irish Water has now capped water charges (full details are here) to attempt to address concerns expressed in recent months. It may now hope that troubling headlines are behind it as 2014 closes. Ireland’s historical legacy of general taxation will be difficult to overcome though, if other water reform cases around the world are any guide. There’s also the additional complexity to the Irish case to address – ‘group water schemes’ where rural water users installed their own granted-aid water systems from the 1960s onwards.

I imagine water pricing in Ireland is going to remain a hot topic for some time to come, so Irish Water may have to brace itself for more tough times ahead in 2015.

Duncan Thomas

University-industry water links piece in The Guardian

Last Monday (3 Nov) I was briefly mentioned in a piece in The Guardian by Oliver Balch. The article was on ‘How business and academia could turn the tide on water scarcity‘ and looked at university-industry partnerships in the UK and Australia as a way to develop ‘innovative solutions to water scarcity problems‘.

Photo: Headline of the piece in The Guardian.

Photo: Headline of the piece in The Guardian. Source: Oliver Balch/The Guardian.

Oliver had called me the week before about the UK water sector’s approach to university-industry links, and R&D in general, so it was great to see the piece published. Here’s Oliver’s take away points from our chat:

Photo: Passage where Oliver mentions some of my views on UK water sector research and innovation, and links with universities.

Photo: Passage where Oliver mentions some of my views on UK water sector research and innovation, and links with universities. Source: Oliver Balch/The Guardian.

Overall it’s an interesting article – and it’s not hidden behind a paywall – so I’d highly recommend you pop over to The Guardian site to give the full piece a read.

Duncan Thomas

No bottled water for Jack Bauer!

A light-hearted post this time… after some heavy regulation and policy matters in recent months…

It’s been a while since we’ve talked about negative environmental impacts of bottled water. Out of the blue, I spotted an interesting extra on the latest Kiefer Sutherland-led TV series, 24: Live Another Day. They deliberately avoided using the typical hundreds and hundreds of plastic water bottles on set by opting for more environmentally-friendly use of boxed water feeding reusable water flasks for cast and crew:

Photo: Cardboard water supplies for the latest 24 production. Source: Fox.

Photo: Cardboard box water supplies for the latest 24 production. (With apologies for the unavoidably prominent ‘product placement’ / ‘promotional consideration’ in this shot!) Source: Fox.

Photo: Taps from the cardboard boxed water supplies. Source: Fox.

Photo: Taps for cardboard boxed water supplies. Source: Fox.

Photo: Reusable flasks in use on the 24 set by crew. Source: Fox.

Photo: Reusable water flasks for the 24 cast and crew. Source: Fox.

I’ve always thought there was scope for reducing the (no doubt quite significant) environmental impact of large-scale film and TV productions. Seems several people beat me to the idea and made viable businesses out of environmental-impact-consultancy to these industries:

Photo: 'Environmentally responsible production' 24-style! Source: Fox.

Photo: ‘Environmentally responsible production’ 24-style! Source: Fox.

Looking deeper, 24 has apparently been a carbon neutral production since 2009 – when it became the first ever TV series to gain this status. Specifically for the ‘Day 9′ production:

‘Each department was able to integrate sustainability into its daily operations. Sets were constructed using 100% FSC-certified lumber and were either recycled or sold to other productions after filming wrapped. In addition, the team was able to divert 98% of the production’s waste from landfill by replacing plastic water bottles with refillable bottles, donating all leftover food and drinks to local charities, and recycling or donating leftover props and costumes. Efforts to minimize air travel and replace generators with grid power tie-ins also helped decrease the production’s carbon footprint.’

All in all, very positive. (I enjoyed the actual series too!) If you’d like to know more details, there’s a video clip here.

Duncan Thomas

NAO review of water sector economic regulation

Roger and I were recently contacted by the National Audit Office to give evidence into a review of Economic regulation of the water sector. We didn’t actually know this review was underway but were happy to be involved, given we’ve drawn on NAO’s scrutiny work in the past, particularly when talking about the (hidden) costs of the privatisation of the England and Wales water industry in 1989.

Shortly after NAO got in touch and we agreed a date to talk, I started searching around to find out what the NAO has been looking at related to the water sector in recent years. This turned up some interesting material, like the June 2014 NAO early review report on potential risks to value for money of the controversial £4.2bn (2011 prices) Thames Tideway Tunnel project in London. I also found the NAO’s November 2013 report on the impact on consumer bills of infrastructure investment that took a combined look at ‘energy, water and, to a lesser extent, telecoms sectors‘.

I saw the NAO has work on Strategic Management of Flood Risk scheduled for Late Autumn 2014, in the wake of the UK’s 2013/14 ‘wettest winter since records began‘ with ‘[e]xtensive and continuous rainfall [that] resulted in widespread flooding with large parts of the country under water for sustained periods‘. The NAO hopes to ‘use the winter floods to illustrate the importance of effective strategic management of flood risk in England‘ and ‘look at whether strategic decision-making in the allocation of funds to both capital and revenue flood management projects is sound, and based on best available evidence; whether current funding arrangements are sustainable given longer term uncertainties and risks; and how decision-making on flood defence fits into the overall system for managing and supporting UK infrastructure‘. Timely and important work, in my view.

Interestingly, given my last post about Regina Finn’s recent guest lecture for our Manchester/UNC-CH class searching for ‘NAO’ and ‘water sector’ also turned up a news story that I’d missed earlier this year. This was on Ofwat’sunforeseen- financial overspend of £5.6 million‘ in 2013/14 due to ‘significant failings in Ofwat’s own internal processes and financial management‘ (see Water Briefing 27 June 2014). This had also been reviewed in Ofwat’s last annual report and was highlighted earlier in the year by a story in Utility Week (24 January 2014) explaining the overspend came from a ‘a special licence fee on companies of £3.2 million‘ and £2.4 million from Ofwat’s reserves as it realised it did not have the internal programme management capacity to complete PR14.

I’ll return to this Ofwat news in another post. Suffice to say I’m intrigued by the tone of the news reporting. Regulatory innovation (major change) will by definition require dabbling in ‘unknowns’ and will entail uncertainty over capacity, budgets and timing (especially when budgets have to be set years in advance of the as-yet-not-finalised regulatory framework changes). So ‘oversights’ could easily be reported instead as ‘somewhat inevitable degrees of risk’ depending on one’s point of view…

Anyway… having looked at this news I wasn’t sure if it had motivated the review of economic regulation by the NAO. However before our conference call it was made clear that NAO was interested to talk to us about ‘the system of economic regulation in water as a whole (i.e. not just Ofwat’s role)‘. They also wanted to talk to us mainly about the first two of these three questions:

  1. Are the ‘right’ outcomes being commissioned, and what assurance is there that companies are delivering?
  2. Are customers being charged a fair price, whilst allowing companies to finance their functions?
  3. Do highly geared structures represent a risk to customers and/or the taxpayer, and is the mitigation which is in place appropriate?
Photo: Roger and Duncan talking with NAO for its review of economic regulation in the water sector.

Photo: Roger and Duncan talking with NAO for its review of economic regulation in the water sector.

In the end our conversation was quite wide-ranging and not limited to these questions. As a rough idea of what we said, we made the following general points:

  • If the England and Wales water companies have ‘world-leading’ performance, why are they not world-leading developers/users of technology for the benefit of customers, e.g. better value-for-money, pioneering more water saving by customers?
  • Ofwat could use more standard global benchmarks of water sector performance to make it easier to see how England and Wales compare to other water sector best practices around the world (current comparisons are mainly qualitative).
  • If the main focus is on value-for-money, why don’t the water companies do more to deal with issues like (huge, spiralling?) customer bad debt?
  • Why is the water sector so proud of spending so much CAPEX? Does it disregard economy/efficiency?
  • From our experience, water companies routinely ‘game’ regulators and policymakers (regulatory optimisation, not illegal, we did stress!); performance indicators get ‘captured’ and have diminishing value for benchmarking performance over time. Company ‘evidence’ submissions need to be viewed in light of this behaviour/strategy.
  • Due to indicator/regulatory-capture, evolution of indicators and regulatory frameworks over time should be seen as ‘normal’, rather than something to oppose (necessarily).
  • Ofwat can be quite short‐termist in some cases, e.g. Roger gave an example of pipe coating instead of pipe bursting with new plastic pipes.
  • The water sector could do more to proactively survey the state of its assets. Otherwise when things go wrong suddenly, it can be expensive and highly disruptive. (We had the current Manchester city centre sewer collapse example on our doorstep here!)
  • Not to be entirely negative, attracting over £115 billion capital investment since privatisation in 1989 has been no mean feat, and bucks the general trend around the world of water utilities’ struggling to attract investment. (Of course whether returns on investment have been fair or ‘sweetened’ to attract this investment is another matter here!)

Overall it was great to be invited to give some input, and our thanks go out to the NAO. We think NAO has got quite a broad remit with this particular review. It’s not going to be easy to summarise key findings! NAO aims to publish its report(s) next February. Once they do, we’ll post up about it here.

Duncan Thomas