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

Regina Finn guest lecture

Note: This post was delayed a few months because of Prof. Dale Whittington and I running our Water Supply and Sanitation Policy in Developing Countries ‘massive open online course’, supported by the University of Manchester, on the Coursera platform. That was a great first experience of doing a MOOC – we had 17,250 learners from over 180 countries, and more than 150,000 lecture views!

Back in April we had a guest lecture by former Chief Executive of Ofwat, Regina Finn. This was for a course I teach on, led by Prof. Dale Whittington, addressing Water and Sanitation Planning and Policy in Developing Countries, at the University of Manchester. I was really looking forward to Regina’s guest lecture. I hadn’t heard any proper news or reports since she left Ofwat towards the end of 2013 after resigning last May.

Photo: Regina Finn gives a guest lecture at the University of Manchester, April 2014.

Photo: Regina Finn gives a guest lecture on our course unit at the University of Manchester, April 2014.

I’ve talked here about reported reactions to the pace and direction of the regulatory reform programme that Regina spear-headed at Ofwat. For instance there had been naysaying, dissenting voices complaining that reforms were too fast, and Ofwat’s reforms did not have a consistent strategy from the top if critics were to be believed. This sounded like a toxic environment in which to reform the sector. I was therefore keen to hear about exactly what had gone on from Regina herself.

Regina first took our joint-UK/USA class through her view of the achievements of the old mode of economic regulation of the England and Wales water industry since privatisation:

Photo: Achievements of the post-privatised England and Wales water sector. Source: Regina Finn.

Photo: Achievements of the post-privatised England and Wales water sector. Source: Regina Finn.

Shen then gave us an overview of changing challenges posed by the landscape shifting in the 25 years since privatisation in 1989:

Photo: Changing challenges for the England and Wales water sector since privatisation. Source: Regina Finn.

Photo: Changing challenges for the England and Wales water sector since privatisation. Source: Regina Finn.

Regina then explained why she felt the regulatory model needed to change, and showed this graphic of diminishing gains in water and sewerage CAPEX and OPEX efficiency gains over time:

Photo: Diminishing returns from efficiency gains of the old Ofwat regulatory model. Source: Regina Finn.

Photo: Diminishing returns from efficiency gains of the old Ofwat regulatory model. Source: Regina Finn.

Regina’s vision for Ofwat’s new model was to future-proof the sector and make it more responsive to customers and to prices they can continue to afford.

Reviewing her tenure as Ofwat’s first-ever Chief Exec from 2006 to 2013, Regina told our class it took about two years initially to build a consensus that reforms to the sector were needed at all. People seemed happy with existing indicators, in spite of diminishing returns across the sector. Regina was clear that it then took even longer to get the reforms enacted – and even now some are still not yet with us, but are on the statute books for the near future.

Photo: Regina Finn addresses our joint-UK/USA class.

Photo: Regina Finn addresses our joint-UK/USA class.

Regina seemed to have been adaptable in her strategic approach. Where she couldn’t broach significant reforms straightaway, she took an incremental/proof-of-concept approach, e.g. to try out non-domestic retail competition first, but by doing so perhaps raising popular expectation for future domestic competition.

Overall, I came away from Regina’s lecture with a changed view of past year’s events. Before I’d imagined Regina’s time at Ofwat towards the end must have been turbulent, given the apparent internal and external sniping at the reforms she was leading. After hearing direct from Regina – and I may be wrong, and of course don’t know all the details – I think she left after she’d achieved what she set out to in the first place, and when she would leave a reform pathway in motion, unlikely now to be reversed.

Coincidentally, later in the same lecture our class also studied the water utility reform case of Phnom Penh, Cambodia. There, highly charismatic utility leader Ek Sonn Chan in just over a decade turned around a water sector that was previously in a woeful state. He literally got a gun put to his head by an opponent of his reform programme at one point, and yet this did not deter him on his course of action. Circumstances in England and Wales were not this harsh at least! And we don’t really want water sectors around the world to have to rely upon the strength of character or charisma of single personalities alone to lever any positive change. Nevertheless meeting Regina Finn for this guest lecture was a reminder for me – rather like when I first met my Waterstink co-founder Roger some 15 or so years ago now – that it is good to have someone with conviction, and with a forward-looking direction of travel, to shift progress more towards what we now expect and will increasingly demand from our water utilities in the 21st century.

Incidentally, if you’d like to know more about the fascinating Cambodia water utility reform case I’ve mentioned above, you can watch a short film about it here:

Duncan Thomas

Understanding sewer corrosion

Everyone knows that as far as sewers go they are usually ‘out of sight and out of mind’. But as anyone who has been personally involved in a sewer malfunction it is a mortifying and scary experience. It shows us how thin is the membrane that protects us from reverting to medieval levels of public health. For the UK water industry, responsible for maintaining the country’s largely Victorian sewer infrastructure, it’s also clear that this is one of the most neglected and costly of their responsibilities since being out of sight also means it is difficult to ascertain the local condition of these vital conduits often until it’s too late.

How exciting is it therefore that work done by Mark T. Hernandez of the University of Colorado, Boulder, reported in Environmental Science & Technology and described in a recent issue of the Economist (14 June 2014) applied the latest bioscience understanding and sensor technology to described a methodology to warn when and where sewers may potentially fail.

Prof. Hernandez has been looking at the gases associated with concrete corrosion in sewage pipes. He has focused on two in particular, hydrogen sulphide, and carbon dioxide. Although hydrogen sulphide contributes strongly to the odour in sewage it does not appear to directly affect pipe decay. However the presence of particular bacteria will under certain conditions convert it into sulphuric acid which does damage pipes!

Photo: Graphic from the article by Hernandez and his colleagues in Environmental Science & Technology.

Photo: Graphic from the article by Hernandez and his colleagues in Environmental Science & Technology.

Studies showed that sewage above areas of pipe corrosion were, as would be expected, highly acidic (pH 1). The biodiversity of the bacteria in that region was also much lower than above areas where there was no damage. In this impoverished ecosystem a bug that turns hydrogen sulphide into sulphuric acid predominated showing how the corrosion process becomes increasingly aggressive. Importantly in the area of the corroded pipe, gas measurements showed not only high hydrogen sulphide concentrations (above 100 ppm) but also very high carbon dioxide levels (10,000 ppm).

Analysis based on these results should lead to an extremely accurate diagnostic test as to where damage is occurring. We hope water companies will use this scientific result to monitor their assets rather than wait until there is a catastrophic structural collapse when there is no recourse other than to digging holes.

Roger Ford