What is Ofwat for?

Energy Managers Association, CEO Lord Redesdale questions why Ofwat isn’t looking more to the long term  for its solutions.

The Water Bill is inching its way through Parliament at the moment with little or no press comment. It is as though water is an uncontentious irrelevance that has little impact on the lives of those living in Britain. As ever with water, when we are faced with drought, floods, pollution or significant raises in cost there is an outcry, but it is very difficult to maintain political and public interest when things return to normal. If the Water Bill were going through Parliament in drought conditions far more attention would be paid to its details. At this time when our ever increasing demand and climate change are storing up so many challenges for the future, water and the Water Bill should be the subject of far greater debate.

Privatisation has brought steady investment into the industry. Furthermore Ofwat has micromanaged the water companies through a five-year funding cycle that has kept costs down for the end user. If water were merely a financial product, privatisation would be seen as a great success and the ownership of the water companies by pension funds would be a great model. The present state of affairs, however, only pays lip service to ensuring supplies remain sustainable.

The climate is already changing. The drought of 2012, which started in 2011, was only elevated due to a two hundred per cent increase in the UK’s rainfall pattern. A major water shortage was averted. Conversely, if we had had a wet winter many parts of the country would have faced the prospect of ground water flooding because the aquifers were close to capacity. Such an event is almost certain to happen in future.  Are we as a nation making adequate preparation?

My argument is that the Water Bill is inadequate to meet the UK’s needs. Ofwat as ever is turning to the market to provide solutions. Competition through the trading of water, it believes, will deal with the difficulties the industry faces. The reality is that there will be a very little opportunity to trade water between companies. And while different companies offering services outside their captive areas might improve provision to customers, they will do nothing to elevate the effect of drought or flooding. The concept of pumping water around the country is environmentally illiterate. One litre of water is one kilogram, pumping tens of millions of litres is the equivalent of millions of tonnes. The energy cost would be enormous and the water industry is already one of the biggest energy consumers in the UK.

What should be in the Water Bill, and I will move an amendment to make sure it is in the Water Bill, is a fundamental change to Ofwat’s core duties. At present Ofwat only has a secondary duty to ensure sustainability: I believe this should be a primary duty. The Government has put forward a proposition that a duty to address resilience is the answer. This would be a start but does not go far enough.

Sustainability being one of Ofwat’s primary duties would make the regulator give as much consideration to sustainability as it does price. Long-term thinking is required, thinking that will allow the industry to sustainably develop over the next 20 years.

I am a water customer now and I certainly plan to be one in twenty years time. Treating water as an economic issue alone is short sighted in the extreme.

www.theema.org.uk