To build a bit of momentum around our own particular water and sanitation views in the coming year, and as we approach Waterstink’s imminent first birthday, we thought it would be a good idea to start a little periodic feature on some of the UK (and to some extent worldwide) water sector’s worst habits.
Our first piece is about ‘monument syndrome’. This was a term I first came across about 10 years ago when working on my PhD at Manchester. It was in a 1960 book called Water Supply: Economics, Technology and Policy by Jack Hirshleifer and his colleagues (published by University of Chicago Press). I think this quote sums up the syndrome rather nicely:
- ‘Commemorative bronze plaques can be prominently displayed on a dam but not on repaired leaks or on an improved schedule of prices.’
Essentially it’s more attractive for politicians, in the parts of the world where they still hold sway over large water-related capital projects (or in policy-making in parts of the world where they are more at an arms-length), to be involved with large-scale, tangible, physical projects in front of which one can be photographed and congratulated or to which one can proudly take the grandchildren in decades to come than to pursue no less important system-wide improvements or continuous, incremental improvements to underground assets and operations. People who vote for leaders pursuing this kind of strategy are just as much in the sway of ‘monument syndrome’, it should also be noted.
‘Monument syndrome’ has not gone away, as is amply demonstrated by another quote some 40 years after Hirshleifer, this time from Uitto and Biswas:
- ‘Politicians like to build new plants for prestige reasons; rehabilitation and efficiency improvements are seen as much less attractive.’
What are the warning signs of the syndrome? Well, for me, whenever someone in the water sector starts uncritically celebrating having spent large amounts of money or achieved some fantastic performance figures, I usually start to worry.
A recent example of ‘monument syndrome’ alive and well in the 21st century water sector comes from the UK’s Thames Water. Someone inside Thames clearly thought that a celebration of its ‘achievements’ in the 20 years since the England and Wales water privatisation was in order. This duly appeared as a European Water News story, is visible from Thames’ corporate timeline, and can be read in the self-contained original here. According to Thames they’ve invested £10 billion since 1989 and in the past five years have:
- reached apparently ‘the best water quality of all water and sewerage companies in England and Wales – 99.99% compliant with Drinking Water Inspectorate standards (2008)‘;
- ‘cut leakage 24% in the past four years; replacing 1,300 miles (2,100km) – 11 times round the M25 – of worn-out Victorian water mains under London since 2002‘;
- ‘maintained in 2009‘ their ‘best-ever sewage works compliance achieved in 2007 and 2008‘;
- ‘seen customer complaints fall 27 per cent in the last year‘;
- ‘spent £400m since 2005 protecting 5,500 properties from the risk of sewer flooding‘.
OK, good. Well done, Thames. Of course I’m well aware that this kind of ‘press release’, promotional material is hardly intended to be a critical engagement with modern issues on the part of Thames so I don’t intend to single out or dispute any of the data specifically. However this kind of material – and you’ll see far more of it if you watch Water UK’s press releases or look at many of the water companies’ annual reports since privatisation – is quite typical of the water sector’s ‘monument syndrome’ bad habit in general.
So, now, let’s take a moment to reflect upon each of these statements in turn shall we? I’m sure we’ll be able to highlight the need for a little more qualification about these large sums of money and big numbers.
First, £10 billion invested by Thames since 1989… Well we’re talking about a natural monopoly over an universal service with state-guaranteed price profiles set many years in advance. Thames’ customers have had no alternative supplier to choose from and so have had no alternative but to invest most of this money through bills that have of course overall risen in real-terms since privatisation. Besides has that £10 billion been invested wisely through support for research and innovation to tackle the climate change and energy challenges of the 21st century by using appropriate operational and capital spend? Or did it support the implementation of more almost Victorian-era ‘solutions’? How much money was spent during this period on preparing for and executing the buying and selling of diversifications to Thames’ UK and overseas business and to the buying and selling of Thames itself to a range of new owners over the past two decades? These are questions I would like answered before feeling comfortable that my £10 billion was well spent.
Second, there’s the impressive looking 99.99% compliance figure, under DWI standards, which is apparently the best of the best. Or is it? I’ve heard DWI talk in the past of how fixation on the percentages of compliance masks persistent non-compliance for the remaining 0.01% or similar. For water companies with large numbers of customers and assets, this can translate into a non-trivial number of actual failing sites (the details are in the DWI’s most recent report on Thames if you’d like to look for yourself). It’s then important to work out the strategic, infrastructure or operational causes of such failures rather than focus just on the successes. Similarly to the £10 billion figure of course, there’s little mention of the energy and chemical demand to get the 99.99% and whether this could (or is planned to) be achieved with a much lower carbon footprint in future.
Third, there’s the 24% leakage cut and the 1,300 miles of pipe. I actually corrected – or better put refined – figures about recent leakage improvements from Ofwat that were circulated by the All Party Parliamentary Water Group last year on this issue. Thinking about it I can recall my annoyance that a public (or quasi-public) organisation like Ofwat was distributing partial information showing the industry it regulates in a more positive light than the more nuanced actual situation warranted. Not good. Anyhow, here’s one picture that captures my point:
From this plot, which comes directly from Ofwat data, you can see that leakage rates went up immediately after privatisation (incidentally, we’ve already mentioned this data in our Cave Review and APPWG inquiry evidence submissions if you’d like more detail). This was partly due to under investment and partly due to changes in monitoring. Targets were brought in around 1992/1993 and leakage rates fell. After the price cut in 1999/2000 leakage levels began to rise again. The Ofwat figures in the APPWG material however only mentioned the leakage high-point around 1994 and the latest figures, ignoring the fact that leakage rates rose after privatisation and even though they came down more recently this was only back to 2000/2001 levels – not to some new, all-time low level. I don’t have the specific data for Thames to hand, but this is the kind of detail I would want to make any sense of the rather isolated 24% claim. Trend information is far more useful to make sense of such claims. There is also the issue of how much lower leakage levels could go if more innovation was encouraged and adopted into the sector. From evidence we’ve heard, a lot more could be done with new approaches. That means that the ‘economic’ (or now so-called ‘sustainable’) level of leakage could be set to be far more challenging and less tolerant of taken-for-granted, traditional practices of digging ditches and scraping around to look for leaks. Lastly, on this point, I can briefly mention the 1,300 miles of pipe. The question I would ask here would be, was that level of installation mandated by Ofwat or volunteered by Thames? (The water sector, in common with other utilities in the UK, has a habit of talking up things that actually, if you know the proper facts, it turns out they had to do after being forced following years or decades of inaction rather than they volunteered to do on our behalf or at their own cost…) Taking matters further, was 1,300 miles more than or less than what was mandated, if it was a compulsory investment? Was it a proactive, preemptive investment or a knee-jerk action after Thames’ hand was forced after critical leakage reports? Was the 1,300 miles installed cost-effectively? How long will the technology last? Were the joints effectively dealt with or will acknowledged past installation problems mean that the new plastic pipes will add new leaks into the overall picture? I could go on…
Fourth, there’s the performance on sewage works. Maintaining a ‘best-ever’ sounds good, of course, until you realise that this may mean that performance is static and has plateaued. We’ve emphasised before that new approaches and technologies are, according to the historical evidence of most modern economies, the way over to transcend such plateaus and ‘diminishing returns’. The question in this case is then, why hasn’t the performance become even better than before?
Fifth, there’s the falling customer complaints. This could well be a good thing. However there could be a whole host of reasons why complaint rates change from year to year. There’s also the issue of how much information customers really have about what water companies do – or don’t do when it comes to investing in the future or issues such as climate change mitigation, adaptation and resilience – and whether satisfaction with these matters is even included in the surveys. Would customers be satisfied if they were aware of the mixed evidence about so-called efficiency ‘gains’ since privatisation, with some authors saying efficiency has actually decreased and even the most optimistic concluding only small increases? Moreover, the trend information is crucial again. If complaints fell by 27% what are the absolute numbers? This represents a fall from what to what? What did the previous years satisfaction rates look like? Are the levels the best now that they have ever been? What are the targets for complaints? Are the targets ambitious, challenging and tightening year upon year? Are they being met?
Sixth, there’s the £400 million on sewer flooding risk measures for 5,500 properties. Well, this is a huge area where one definitely needs qualification of what’s going on. To start with, what absolute and percentage reduction of at-risk properties does this represent? How has this at-risk profile changed over time? What are the bottlenecks in decreasing the risk for more properties? Have the sewer flooding risks been removed entirely or transposed to other areas, parts of the environment or other properties? What kinds of measures have been used? Are they the most cost-effective and whole-life sustainable ones? Are more or less properties being exposed to this flood risk each year, say due to planning practices or house building plans? The list goes on with this one, I’m afraid!
So there we have it. A little bit of food for thought in this slightly longer post than usual to mark the start of our new ’10 habits for 2010′ feature. We now promise we’ll try our best to stick to posting up a critique of a different water sector bad habit each month as we move through 2010 until we complete our list.
Until then, Roger and I at Waterstink wish you all the best for the Christmas season and we’ll be back with more posts in 2010 – and with something to celebrate our blog’s 1st birthday in January!
Update (16/11/2016): Public domain featured image added from this source.