Regulating for a sustainable water sector

regulating for a sustainable water sector supporting catchment scale approaches under the water regulatory framework

“green alliance...

regulating for a sustainable water sector

by Ruth Davis, Caroline Read and Phil Burston Published by Green Alliance, October 2005, £10 Artwork and printing by Calverts – www.calverts.coop Printed on Revive matt – 75 per cent post-consumer waste ISBN 0 9549757 4 X © Copyright Green Alliance 2005 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Green Alliance. Within the UK, exceptions are allowed in respect of any fair dealing for the purposes of private research or study, or criticism or review, as permitted under the Copyright, Design and Patents Act, 1988, or in the case of reprographic reproduction in accordance with the terms of the licences issued by the Copyright Licensing Agency.

This book is sold subject to condition that it shall not, by way of trade or otherwise, be lent, resold, hired out or otherwise circulated without the publisher's prior consent in any form of binding or cover other than that in which it was published and without a similar condition including the condition being imposed on subsequent purchaser.

Green Alliance 36 Buckingham Palace Road, London SW1W 0RE tel: 020 7233 7433 fax: 020 7233 9033 email: ga@green-alliance.org.uk website: www.green-alliance.org.uk Green Alliance is a registered charity number 1045395 Company Limited by guarantee, registered number 303763337633

about the organisations Green Alliance Green Alliance is one of the UK’s foremost environmental groups. An independent charity, its mission is to promote sustainable development by ensuring that the environment is at the heart of decision-making. It works with senior people in government, parliament, business and the environment movement to encourage new ideas, dialogue and constructive solutions.

RSPB The RSPB is the UK charity working to secure a healthy environment for birds and wildlife, helping to create a better world for us all.

acknowledgements Our thanks go to Water UK and RSPB for their support of this project. We are grateful to all the interviewees and seminar participants who contributed valuable time and input, helping to shape the report, particularly Dieter Helm, Barbara Young, Philip Fletcher and Graham Wynne for their contribution to the seminar.

We would also like to thank Jacob Tompkins for his contribution to the report, seminar and project development.

The recommendations presented in this report are put forward by Green Alliance and RSPB, and do not necessarily represent the position of all project partners.

regulating for a sustainable water sector

1

regulating for a sustainable water sector

2

contents summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

the project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6

barriers to sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . the planning horizon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . value for money – who decides and how? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . no incentive for innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . an insular approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . regulatory certainty versus long-term sustainability . . . . . . . . . . . . . . . . . . . . . the role of other sectors in protecting water . . . . . . . . . . . . . . . . . . . . . . . . . . . the polluter pays principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . public awareness and understanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7 7 7 8 8 8 9 9 10

recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11

moving the agenda forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

references . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15

appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16

summary

3

This report outlines recommendations for reforms to the regulatory regime governing the water industry to ensure that it can contribute fully to integrated and sustainable river basin management.

regulating for a sustainable water sector

We are calling on the government to reform the water regulation framework to enable it to meet the challenges of climate change, growing demand for water and poor water quality.

In summary, we propose: ●

Establishing longer planning horizons for investment to manage the shift from ‘end of pipe’ to source control solutions.

●

Aligning future industry investment to the cycle of River Basin Planning, and subjecting schemes to cost-effectiveness analysis, taking full account of environmental and resource costs.

●

Creating specific incentives for innovation to reward measures that deliver source control, water efficiency and sustainable technologies for water treatment.

●

Greater flexibility from regulators when assessing investment decisions, as innovative techniques will not always guarantee the same certainty of outcome as engineered options.

●

Integrated decision-making across government to ensure that other sectors, in particular farming, spatial planning and development, contribute to sustainable water management, so that the burden does not fall exclusively on water companies and customers.

●

Establishing formal links between land-use planning and water resource/sewerage service planning through for example: a new Planning Policy Statement on Water; strong legal duties on local authorities to take into account water quantity and quality in carrying out their planning functions; a role for companies as statutory consultees on regional spatial strategies and local development frameworks.

The recommendations outlined in the report should be considered in the context of the continuing need to protect vulnerable customers, and secure the long-term financial stability and viability of the industry.

We believe these recommendations would encourage a more sustainable pattern of industry investment aligned to the objectives of the Water Framework Directive and providing long-term security for water supply and the water environment. This report will be of particular interest to those working on water regulatory analysis, and long-term basin-scale approaches to water sector services.

4

introduction

regulating for a sustainable water sector

Green Alliance, in partnership with RSPB and Water UK, has been investigating the opportunities to achieve a regulatory framework for the water sector in England and Wales which will promote the sustainable use and management of this vital natural resource.

The over-riding framework for resource use in the UK is the UK Sustainable Development Strategy.1 The strategy calls for the prudent use of natural resources and effective protection of the environment through an integrated approach to long-term development. Its over-arching aim is to provide “a better quality of life for everyone, now and for generations to come”.

“

The recommendations in this report are designed to help achieve the integrated approach of the UK Sustainable Development Strategy. This requires a shift in investment away from solutions conceived within short-term planning horizons towards approaches which tackle demand and pollution at source, and whose benefits will be enjoyed by water customers and society in the long-term. Patterns of industry investment are largely determined by the demands of the environmental and economic regulators, expressed through the price review process. It follows, therefore, that to reduce the future burden to deliver the government’s sustainable development aims in the field of water on water customers and the management, the roles and attitudes of the regulators, and the form of the periodic review environment, a more integrated process itself, must be subject to scrutiny, and if approach is required ” necessary to reform. A modernised regulatory framework will then equip the water industry to meet the challenges of compromised water quality, growing public demand and accelerating climate change.

This report is a contribution to the debate on the future of the water price review process, following the conclusion of the fourth periodic review at the end of 2004.

Decision-makers in the water industry, government, regulators and stakeholder groups were consulted on the changes required if the regulatory framework is to meet the demands of the Water Framework Directive, and contribute to more sustainable patterns of investment by the water industry and others.

There are many good examples of sustainable approaches to water management in Europe and beyond; and some good processes and projects in the UK.2 However, such examples remain exceptions rather than the rule; the majority of investment by industry continues to be focussed on end-of-pipe treatments to ensure water quality, and the development of new resources, to guarantee security of supply.3 These solutions have served us well in the past, and it is important to recognise the substantial improvements in the quality of drinking water and the water environment that industry investment has made over the last three periodic review

The advent of the Water Framework Directive, which seeks to establish a regime of sustainable water management within the EU, should help to integrate a range of policy areas and achieve more holistic management of water. However its success as a catalyst for change will depend upon the extent to which we are prepared to adapt our existing structures and processes to reflect its ethos. This report proposes a modernised regulatory framework for the water industry, which we believe is fit to meet the purposes of the Directive; the challenge will be for Government and its regulators to embrace the need for change.

It is encouraging that the process of reform has already started, with the introduction of a sustainability duty for the Office of Water Services (Ofwat) in the Water Act 2003,4 although the exact nature of this duty is still to be defined. Its precise meaning and how this will be carried through into the conduct of the next periodic review cycle is central to delivering many of the recommendations arising from this report.

background The regulatory regime that governs the water industry in England and Wales has helped to deliver a significant programme of environmental investment since its inception, at industry privatisation, in 1989.5 The outcomes of this investment include better drinking and bathing water quality; higher standards of wastewater treatment to reduce nutrient loads on rivers, lakes and seas; and efforts to tackle the impacts of abstractions on threatened rivers and wetlands. However these improvements have relied heavily on new infrastructure and complex treatment processes. As a result energy and chemical inputs have risen dramatically 6 and have rarely been taken into account when planning investment. We must therefore consider the possibility that the current system is contributing to an unhealthy reliance on ‘end of pipe’ solutions to immediate environmental problems.

There are other complementary or alternative ways to deliver clean, safe drinking water and good ecological condition of water bodies. These include tackling pollution at source, and promoting water efficiency measures for homes and businesses. Source control approaches offer potentially significant spin-off benefits in the form of attractive, wildlife-rich landscapes and, in some cases, a more secure future for vulnerable rural communities. The problem seems to be that there is little incentive or latitude within the current price review system to invest in these approaches.

5

regulating for a sustainable water sector

cycles. However such traditional approaches are unlikely to prove economically or environmentally viable in the long-term given the combined impacts of agricultural and urban diffuse pollution, climate change, and rising household numbers and per capita demand. To reduce the future burden on water customers and the environment, a more integrated approach which seeks to address at least some of these pressures at source is required.

regulating for a sustainable water sector

6

“

This conclusion is supported by the outcomes of the most recent price review.

The review was conducted under the shadow of the Water Framework Directive, and yet showed little sign of adaptation to the new objectives and management processes enshrined in that legislation. Whilst the Water Framework Directive does require a continuing focus on reducing the impacts of water company abstractions and discharges, it also creates a new obligation to reduce the level of treatment required for drinking energy and chemical inputs water.7 Moreover, it established a planning process have risen dramatically ” at the river basin scale, which should ensure that the water industry’s contribution to achieving Water Framework Directive objectives is proportionate, sustainable and cost-effective.

Cost-benefit analysis should include the consideration of environmental and resource costs, and hence spearhead a move towards source controls and water efficiency measures, and away from ‘end of pipe’ solutions.Yet, in the recent periodic review settlement, just two schemes were funded whose focus was landmanagement practice rather than the application of new treatment technologies, and the funds provided for water efficiency measures were minimal.8 It would appear, therefore, that much more needs to be done to achieve a regulatory regime capable of delivering Water Framework Directive outcomes, providing long-term value for customers’ money, and making a meaningful contribution to Government sustainable development goals. Whilst the current system has served us well and may still be structurally sound, it is no longer fully aligned to the needs of society or the emerging legislative drivers. The case for reform must be addressed.

the project This report is based on structured interviews with decision makers in the field of water policy, and a stakeholder workshop with a wide range of experts in the sector (see appendix). The insights and knowledge of these experts allowed the authors to identify the main barriers to sustainability in the water sector and challenges for the future of the periodic review system. Dr Dieter Helm of New College Oxford provided an economic and regulatory analysis of the water industry Water, the Environment and Regulation: Changing Functions, Changing Frameworks, as preparation for the stakeholder workshop. This report can be obtained from ga@green-alliance.org.uk.

barriers to sustainability

7

The consensus of the experts was that there is a case for reform of the regulatory system, though not necessarily for the alteration of its basic structures. Most stakeholders agreed that the current framework favours tried and tested solutions to water “ whilst the current system has management problems with highly predictable served us well, it is no longer outcomes, and provides little incentive or latitude for innovation. They also concurred that the fully aligned to the needs of system is not designed to encourage holistic assessments of the sustainability of investment society or the emerging programmes, and that the time-horizons within which decisions are made exacerbate this problem. legislative drivers”

regulating for a sustainable water sector

the planning horizon Many stakeholders drew attention to problems with the investment planning horizon, pointing out that the ‘payback’ for more sustainable approaches usually takes place over a longer period than the five year window for the periodic review, creating an economic bias in favour of ‘quick-fix’ solutions. A particular problem was likely to arise, where, for a time, investment would be required in both ‘end of pipe’ solutions and basin-scale approaches, before moving in the longer-term to a fuller dependence on source controls.

value for money – who decides and how?

A related issue is that of the range of factors taken into account in determining whether particular measures are good value for money and/or economically efficient in delivering the required outputs.

A particularly controversial issue was the concept of the economic level of leakage (ELL9). Whilst some stakeholders believed this was set appropriately, and worked to protect customers from unnecessary costs, others felt it took little account of water scarcity and environmental sensitivity, and that if adjusted to do so, could drive further much needed leakage reductions across southern and eastern England.

It was noted repeatedly by stakeholders that the interpretation of the sustainability duty placed on Ofwat could be used to ensure the economic regulator takes greater account of the environmental and social impacts of its decisions. This might require further scrutiny of concepts such as the ELL to ensure that it is aligned with the concepts of cost-effectiveness being developed to support implementation of the Water Framework Directive.

regulating for a sustainable water sector

8

no incentive for innovation Some stakeholders suggested that the current system, whilst rewarding efficiency savings, does little to incentivise more sustainable approaches and solutions to water management problems.

“

Whilst the environmental regulators specify required outcomes, they currently have no role in appraising the environmental impact of how those outcomes are achieved. Conversely, the economic regulator oversees a system which rewards companies for delivering these outcomes efficiently, the current system rewards creating an incentive for prudent economic management of the investment programme. This system is not efficiency savings but does designed to recognise or reward solutions with a light environmental footprint or multiple benefits, little to incentivise more where these are not directly reflected in the company bottom line. sustainable approaches

and solutions”

As a result, neither side of the regulatory equation is currently responsible for ensuring that the solutions put forward by companies are, in terms of sustainable development, the best for society. There are opportunities to adjust the roles of both sets of regulators to address this problem.

an insular approach One challenge raised by several stakeholders was the apparent reluctance of the regulators to consider examples of sustainable approaches developed outside England and Wales. Examples from Germany, which operates within the same EU legislative framework and has a similar climate, suggest that measures such as tariffs promoting rainwater use and grey-water recycling, and the use of economic instruments to promote alternative and innovative approaches to improving water efficiency, can have a substantial impact on demand.10 Whilst stakeholders accepted that the effectiveness of such approaches needs to be carefully scrutinised, there was a feeling that the lessons learnt could be adopted much more quickly, rather than their application delayed through seemingly interminable research projects and pilot studies.

regulatory certainty versus long-term sustainability

“

Some stakeholders pointed to the strict application of regulatory standards, for example on discharge consents, as a barrier to the adoption of more sustainable technologies. By definition, source control options tend source control options may to operate over wide areas and medium to long-term timescales, and as such are unlikely to provide the prove cheaper, cleaner and certainty of outcome of a treatment plant or new more effective than end of reservoir.Yet they may prove cheaper, cleaner and ultimately more effective than end of pipe solutions.

Some industry and environmental stakeholders therefore pipe solutions”

the role of other sectors in protecting water Many within the industry and its regulators believe that the responsibility for achieving more sustainable solutions lies with other sectors – in particular with the farming and housing sectors, which until now have not been subject to the level of scrutiny and regulatory pressure applied to the water industry. Understandably the industry and its watchdogs are reluctant to act whilst there is a perception that parallel action by these sectors will not be forthcoming. A crucial recommendation of this project is that action in these areas must run parallel with, and complement, any reforms to the regime governing the water industry. This requires firm action

by Government and a greater awareness outside the water sector of the impacts of human activities and choices on water supply, water quality and the aquatic environment.

Linked to this requirement is the need to ensure that water protection is considered fully in the policy and planning regimes governing other sectors that have a major impact on the quality or quantity of the resource. Many cited the Sustainable Communities Plan as a prime example of failure in this area. Neither water supply, nor wastewater treatment requirements, were considered during the early stages of the planning process, or recognised as a potential constraint to development, despite the escalating impacts of climate change in some of the driest parts of England. Many felt there was a strong, if not irrefutable case for water companies to be statutory consultees on such plans, and to be able to articulate clearly the environmental and economic consequences of supplying water and sewerage services to new development.

the polluter pays principle Linked to the perceived need for more urgent action by other sectors, stakeholders identified misinterpretation of the ‘polluter pays’ principle as a key barrier to innovative investment by industry. Environmental stakeholders and industry representatives pointed out that in some European countries payments to farmers who achieve more sustainable land management practices are seen as a cheaper, more equitable and more sustainable approach to achieving good water quality than the investment of much greater sums in new or improved treatment facilities.

Notable success has been achieved in the Wesser Ems region of Lower Saxony, Germany, where revenues raised by a tax on water abstraction are administered by local “Cooperation Committees” who provide support payments for farmers to enter into management agreements to reduce nutrient loads.11 The overall distribution of costs and benefits of any scheme must be considered when applying the polluter pays principle.

9

regulating for a sustainable water sector

suggested that, whilst compromising drinking water standards would not be acceptable, there were other contexts in which the regulator should consider a trade-off between the sustainability of an approach and the degree of certainty of the outcome. For example, source control might be particularly suitable for preventing deterioration in raw water quality and preventing spikes in demand or pollution which would otherwise have to be accommodated for by increasing treatment capacity.

regulating for a sustainable water sector

10

public awareness and understanding

“

Another challenge identified by many industry stakeholders is the limited understanding amongst customers of water management issues. Contributing to this lack of awareness is the media’s focus on pricing and leakage, with few examples of in-depth understanding of the environmental and technical facing companies. As a result, companies often there is currently only a challenges receive negative publicity for the introduction of hosepipe bans or other demand management measures, and are very weak price signal blamed for price increases which are required to deliver a to customers about the better standard of service and environmental management.

value and scarcity of water resources”

The low percentage of household metering and an associated water charging structure means that there is currently only a very weak price signal to customers about the value and scarcity of water resources. Although consumer groups now recognise the benefits of metering in water stressed areas, public perception is lagging behind, as demonstrated by the recent negative media coverage of Folkestone and Dover Water’s application for water scarcity status.

recommendations

11

The following recommendations would help to overcome these barriers and facilitate a more sustainable water regulatory framework for England and Wales:

regulating for a sustainable water sector

longer planning horizons must be established for investment to manage the shift from ‘end of pipe’ to source control solutions The benefits of source control measures are often realised over extended time scales. There will also be scenarios in which source control solutions will need to run in parallel with ‘end of pipe’ options to ensure the maintenance of acceptable quality standards. This must be recognised within the planning cycle, by allowing the water industry to put in place ‘dual’ programmes, with source controls delivered to coincide with the end of asset life (for example of a water treatment plant). This will require water resource and sewage management programmes to be identified through a long-term planning system (covering periods of 20 – 50 years), and embedded in the shorter-term framework of the Water Framework Directive’s river basin planning cycle (every six years). future industry investment must be within the cycle of river basin planning, and be subject to cost-benefit analysis, taking full account of environmental and resource costs A combined formal delivery timetable would provide links between the Water Framework Directive and the periodic review process that are currently missing.

We propose that: a) Programmes of measures developed in River Basin Management Plans must be a key determinant of the quality improvements programme in the periodic review. b) Final price determination should follow completion of the River Basin Management Plan and its six yearly cycle in order to take this link fully into account. c) Industry investment should be subject to cost-effectiveness appraisal techniques which take full account of environmental and resource costs.

The application of these techniques should be undertaken jointly by the environmental and economic regulators.

regulating for a sustainable water sector

12

government and regulators must establish clear targets and incentives for innovation A key barrier to innovation is the lack of a holistic appraisal of proposed investment measures, and the lack of incentives within the regulated market for the application of sustainable technologies. A number of options exist to promote innovation by the industry. We suggest that government and its regulators undertake research now into which would be the most effective, and introduce these ahead of the next investment planning cycle. Three possible approaches are: a) The development and application by the environmental regulators of bench-mark standards, targets or scoring systems to test company-proposed solutions in terms of their overall environmental footprint. Companies could be asked to demonstrate that they are using the most sustainable technologies to deliver the required outcomes. b) The development by the economic regulator of financial incentives for more sustainable projects and programmes. This could be based on assessments of resource and environmental costs. c) The full application of cost-effectiveness analysis to programmes of investment. However whilst we recommend this as an essential first step, we feel it is unlikely to drive forward innovation on its own. This is because it can only compare approaches that have been worked up already, rather than actively require alternatives. regulators must be flexible when assessing investment decisions as innovative techniques will not always guarantee the same certainty of outcome as engineered options Defra, Ofwat and the Environment Agency must ensure that the regulatory system is flexible enough to allow the most cost-effective solutions to be implemented. Government should charge its regulators to produce joint guidance on this issue, identifying when and where there may be trade-offs between certainty of outcome and overall environmental costs and benefits. Such trade-offs will need to be appraised in the context of the risk of failure. For example, the risks of a serious degradation in the quality of public water supply may make tougher standards appropriate; whereas the achievement of discharge standards for nutrients may legitimately be sought through more innovative means.

●

Action on diffuse agricultural pollution;

●

Action to ensure improved standards of water efficiency in housing (both new-build and existing stock);

●

Action to tackle urban drainage.

the spatial planning system must be formally linked to water resource and sewerage services planning Acknowledging water as a material consideration in spatial planning would provide a strong basis for managing demand for water and sewerage services and delivering Water Framework Directive objectives. Recognising the impacts of supplying water and sewerage services to new housing would also encourage innovative mitigation measures, including dual quality water supply and on-site wastewater treatment. The following steps, if taken, would deliver the formal links between water and spatial planning necessary to secure truly sustainable development: a) A new Planning Policy Statement on Water to ensure that local planning authorities take full account of water availability and sewerage capacity when preparing local development frameworks and taking planning decisions. b) Strong legal duties upon regional and local authorities to take into account water quantity and quality, and specifically Water Framework Directive requirements, in carrying out their planning functions. This will translate into Programmes of Measures to be undertaken by these authorities in the fields of spatial planning and building design. c) A role for companies as statutory consultees on local development frameworks and major development plans. d) Formal, long-term, water industry sewerage and urban drainage plans developed under guidance from the regulators. Strategic planning of wastewater treatment would avoid the current “tack-on” approach to improved standards, reduce environmental and resource costs, and give the industry greater certainty about future investment requirements.

13

regulating for a sustainable water sector

government must ensure that other sectors, in particular farming and spatial planning and development, contribute to sustainable water management so that the burden does not fall exclusively on water companies and customers Action to protect and restore the quality of the water environment must be cross-sectoral; an approach confirmed by the principles of river basin planning.

But whilst mechanisms exist to ensure water company action in this area, little financial or “ the government must ensure regulatory pressure has so far been applied to other key sectors, notably farming and that other sectors play their construction. The government must ensure full part in delivering that other sectors play their full part in delivering environmental outcomes in an equitable and cost environmental outcomes” effective manner. This will require:

regulating for a sustainable water sector

14

“

the recommendations outlined in the report should be considered in the context of the continuing need to protect vulnerable customers and secure the long-term financial stability and viability of the industry It is our view that none of the changes proposed here represent a threat to customers’ interests or the long-term financial stability of the water industry.

However we recognise these as key considerations in the design and operation of the regulatory regime governing water. Our view is that the application of more sustainable technologies the application of more will be driven, at least in part, by the need to reduce the economic burden on customers in the future; sustainable technologies since source-control approaches are likely to prove will be driven, at least in considerably cheaper than more traditional approaches the medium term. Similarly, we are convinced that part, by the need to reduce in if appropriate incentives are created to encourage the efficient delivery of sustainable solutions, this will be the economic burden on reflected in the continued confidence of investors in the customers in the future� industry. We propose as a challenge to Government and its regulators, a dialogue with customers and investors to determine how their needs can be met whilst ensuring that in future, industry investment makes the fullest possible contribution to sustainable development.

moving the agenda forward These recommendations provide a template for changes to regulation of the water industry. To put them into practice will require innovation and flexibility within government and the regulators themselves, whilst keeping in mind legal and policy goals for the water environment, the interests of customers, and the financial viability of the industry. This approach is closely aligned with the better regulation agenda being promoted by the UK in Europe. Putting our programme into practice would demonstrate continued leadership in this field, and show how, by modernising delivery, we can secure equitable and sustainable outcomes for society.

1

The recent funding through the Periodic Review process of a £9 million programme of sustainable land management by United Utilities, in the uplands of Northern England, is one such example.

2

The final Fourth Periodic Review settlement involves £16.8 billion of industry investment over the period 2005-10.Of this 3.5 billion will involve improving waste water treatment as part of the environmental programme and, £2.2 billion the development of new water resources. Source: Ofwat (2004) Future water and sewerage charges 2005-10: Final determinations. Available at: www.ofwat.gov.uk

3

UK Government (2005) Securing the Future:The UK Government Sustainable Development Strategy Available at: www.sustainabledevelopment.gov.uk/documents/publications/ strategy/SecFut_complete.pdf

4

Section 39, paragraph 4(e) Water Act (2003)

5

Since privatisation the water industry has invested £50 billion. Source: Water UK’s written evidence submitted to Select Committee on Environment, Food and Rural Affairs, dated 17th October 2003.

6

Water UK (2004) Towards Sustainability shows energy use and CO2 emissions from the water industry have risen inexorably since data was first collated in 1998/99. Available at: www.water.org.uk/home/news/press-releases/waterindustry-facing-up-to-the-challeng/final-report-03-04.pdf

7

Article 7.3 of the Water Framework Directive.

8

Ofwat funded a £9 million project on United Utilities land to investigate “…the potential impact of changes to land management practices in two upland areas (including Dark Peak and Bowland Fells) on the condition of sites of special scientific interest in these uplands and the quality of the rivers draining them.” A similar, small-scale project was funded in Northumbria Water’s region to address problems with water colouration.

9

The economic level of leakage is the point at which the value of the water saved is worth the cost of the investment.

10

The city of Frankfurt set itself the goal of reducing the current dependence upon long-range water supply through the efficient use of water in private households, public institutions, and businesses. Through a widespread campaign, water consumption in the year 2000 should be reduced by 20% in comparison to 1991/1992 (by changes in consumer behaviour, upgrading of water-saving installations and fixtures, water-saving contracting, etc). Source: The German Water Sector: Policies & experiences, author unknown.

11

See case study presented in Water4All website: www.water4all.com

15

regulating for a sustainable water sector

references

regulating for a sustainable water sector

16

appendix Regulating for a sustainable water sector interviews Daniel Instone Phil Rothwell Catherine Wright Justin Tamberham Dave Tickner Maeve Whyte Alistair Burn Chris Uttley Maxine Holdsworth Bruce Bendall Dan Green Nicola Simpson Andrea Cook

Defra Environment Agency Environment Agency CIWEM WWF NFU English Nature Countryside Council for Wales NCC United Utilities Wessex Water Ofwat WaterVoice

Regulating for a sustainable water sector stakeholder seminar, 7 March 2005 Bruce Bendell Emma Blunden Jim Boudier Alistair Burn Phil Burston Barrie Clarke Andrea Cook Jerry Cresswell Ruth Davis Margaret Devlin Philip Fletcher Dieter Helm Martin Hurst Daniel Instone John Lloyd Jones Carmel Jorgensen Paul Knight Tom Le Quesne Rob Oates Ronan Palmer Roy Pointer Caroline Read Chris Shirley-Smith Pamela Taylor Guy Thompson Jacob Tompkins Graham Wynne Barbara Young

United Utilities Environment Agency Water industry consultant English Nature RSPB Water UK WaterVoice Thames Water RSPB South East Water Ofwat (Presentation) New College, Oxford (Presentation) Prime Minister’s Office Defra Countryside Council for Wales Salmon and Trout Association Salmon and Trout Association WWF WWF Environment Agency AWG Green Alliance Water Works UK Water UK Green Alliance Water UK RSPB (Presentation) Environment Agency (Presentation)

Green Alliance 36 Buckingham Palace Road, London SW1W 0RE tel: 020 7233 7433 fax: 020 7233 9033 email: ga@green-alliance.org.uk website: www.green-alliance.org.uk