Before the year draws to a close here are some of my initial impressions of the new Water White Paper that came out earlier this month, back on 8 December.

It opens with two irksome boasts: first, that the UK water privatisation is a ‘success story’; and second that £90 billion has been spent since 1989. A neutral tone about the reality of the post-privatisation performance of the England and Wales water companies would be more appropriate in a piece of policy. It’s also rather crass to keep going on about how much money has been spent by ‘the industry’. These investments have been funded by higher customer bills and taking on staggering levels of debt for future generations to worry about, after all. These are not exactly things to be proud of in the current global economic climate!

Beyond this rather shaky start though, there’s much interesting material in the White Paper. It covers a lot of ground. There’s a whole new approach to abstraction. There’s limited movement on competition. Sustainability and integrated planning are emphasised. Time will tell how much finally gets picked up in legislation and regulation. But there are at least things that could lead to some interesting changes…

I’ve grouped my initial thoughts as the ‘good’, the ‘bad’, and ‘undecided’:

The Good

  • It’s good that the resource-intensive Cave, Walker and Gray independent reviews have not been left hanging by the Coalition, and have been taken up in the White Paper
  • Current pressures on water resources and harm from over-abstraction are prominently noted
  • It’s highlighted that future likely increases in water stress due to climate change will not just be limited to the South East of England (an increasingly common myth)
  • There’s a call in the Paper ‘to innovate and develop expertise’, specifically on leakage and water efficient technologies/treatment, even though the driver is noted as the ‘global water market’ – a nebulous concept, as market fragmentation and political uncertainties mean it doesn’t really exist!
  • It’s recognised that ‘new technology and new ways of working’ are needed – another boon for innovation champions in the sector
  • A £3.5 million water competition fund via the Technology Strategy Board is announced, to launch in March 2012
  • Affordability measures are dealt with
  • The Government don’t plan to compensate abstractors for losses during transition to a new abstraction regime, as the changes are motivated by a need to protect better the environment – a bold stance
  • A partial (local) ‘water national grid’ is discussed, and its carbon implications are raised (Roger would remind me though, that cross-border water sharing is nothing new, and happened pre-privatisation)
  • Integrated planning is stressed – to encompass the differing timescales and objectives of RBMPs, WRMPs, drought plans, and the Price Reviews – and longer term guidance will be provided to Ofwat and the water companies
  • There’s a commitment to take forward promotion of anaerobic digestion (AD) – albeit after a pending EC report on the Sewage Sludge Directive

The Bad

  • The Paper talks about increasing the innovativeness of the sector and yet stresses it should low-risk for investors – a contradiction in terms?
  • There’s no mention that the sector got locked into an unsustainable capital, energy and debt-intensive paradigm after privatisation
  • The impacts on the supply chain of cyclical investment patterns are not highlighted – even though they were mentioned by the recent Gray Review (and have been the subject of research by UKWIR and others)
  • Apparently the new proposed abstraction regime will only be in place by the mid- to late-2020s – this is too slow and subject to too much political risk
  • The metering approach is very weak, and there’s no universal adoption goal
  • The Paper is also weak on customer bad debt, although the Walker Review stressed it was over £1 billion in 2008/09 – three times higher than bad debt in the UK’s electricity and gas sectors combined!

Undecided

  • There’s going to be a Government-funded rebate for South West Water‘s customers (as their network was apparently worst off at privatisation, and has needed disproportionate investment funded by higher than average bills). Shouldn’t there be some qualifying test first? Shouldn’t this rebate be wholly or partly funded by SWW if its investments since privatisation were not as efficient as the sector’s benchmark leaders?
  • For competition there will be no retail and distribution business separation. There’s still a certain pandering to ‘investor confidence’. The Paper recommends an ‘evolutionary’ approach even though approaching competition this way has achieved practically nothing since privatisation
  • The large user supplier-switching eligibility threshold will drop from 50 megalitres to 5Ml, putting 10 times more business customers into the ‘market’ (26,000 instead of 2,200). The threshold will eventually drop to zero – via an as yet non-timetabled ‘future Water Bill’ – but domestic customers still look unlikely to ever be able to switch water suppliers
  • There’s a desire to learn from the Scottish competition approach but the timetable is key – when will it happen? There has been too much procrastination, e.g. the years wasted whilst Ofwat split hairs over whether it should ‘promote’ or ‘facilitate’ competition
  • The Government might make sustainable development a primary duty for Ofwat, as the range of ‘challenges the sector faces‘ it says make a ‘strong argument‘ that ‘sustainable development must be central to everything that Ofwat does‘ (p.97) – this might be good if it happens… but will it?

With these first few thoughts we’ll close by both wishing you a very Happy New Year. Here’s hoping some of the positive ideas in this new Water White Paper will mean it’ll be more a promising, innovative and sustainable year ahead for the UK’s water sector!

Update (15/11/2016): Featured image photo added from this source.

Duncan Thomas

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