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07 February 22

Affinity Water responds to Defra’s SPS statement

  • Regulators working together on priorities is welcome news
  • Challenges remain such as stresses on chalk streams
  • Mature conversation needed about how household bills are paid and investment phased

Article for favour of publication by Nicky Fomes, Regulation and Strategy Consultant, Affinity Water

Affinity Water welcomes the publication of the government’s strategic priorities statement (SPS) for Ofwat published on 2 February. The finalisation of the SPS gives welcome clarity over the direction for the water sector over the next five years and beyond.

The SPS remains substantively similar to the draft, with a few key changes which we focus on in this article.

The SPS includes a number of positive amendments compared with the draft.

There is a shift in emphasis towards encouraging the industry to improve its understanding of asset health as well as focusing on resilience. This is needed and reflects recent industry work on asset health indicators, on understanding and improving asset health maturity. Further emphasis on asset health will help the industry if it leads to developing leading indicators that increase our understanding of how our assets will perform in the future, and if we can find ways to better evidence the level of risk we face in operating our assets. The sector also needs to explore whether the drivers of asset health now will be the same in the

future, for example as climate change impacts are felt more strongly and as new development places different loads on our networks than we have experienced historically.

We welcome the added emphasis on companies sharing data, information and ideas to help with improving the resilience of the water sector.

Lead pipes were used in the construction of some homes before 1970. This includes the supply pipe entering the home and internal plumbing. The SPS provides welcome clarity over the need for trials to remove traces of lead to ensure water remains of the highest quality when used in the home. While the details behind this announcement are still to be worked out, we expect it will help the industry to move forward in helping to maintain our high standards of water quality. Testing and trialling replacement of lead service pipes for different types of customers will help us understand what practical problems we are likely to face, for example with flats and shared supply pipes. The industry will need to explore how customers will react to offers of help with replacing their internal plumbing, including exploring whether customers are willing to pay for their internal pipework the be replaced and to tolerate the disruption involved.

We welcome the expectation that Ofwat will track its progress against the government’s strategic priorities through its annual report. We think that this will improve the transparency and accountability of Ofwat in delivering government policy improvements in the sector.

Lastly, we welcome government’s expectation that our regulators should work together to remove any barriers to nature-based solutions. We are supportive of considering impacts on the environment and drinking water protection on a catchment basis using nature-based solutions and partnership working. We welcome any moves to make this more straightforward to implement.

Areas retained from the previous statement that we support and welcome include continued emphasis on resilience (operational, security, financial and corporate), protecting the environment through the water industry strategic environmental requirements and sector targets under the Environment Act, meeting the requirements of the EA National Framework for water resources, reducing leakage, improving water efficiency, improving flood resilience, improving service to vulnerable (and transiently vulnerable) customers, reforms to the non-household retail market, enabling markets for ecosystem services and continued focus on developing the NAV and new connections markets.

There are also some challenges that arise from the SPS for us, as a water only company operating in the water stressed South East of England, facing population growth and significant impacts of climate change. We recognise the high-profile unacceptability to the public of pollution events and combined sewer overflows (CSOs) in the wastewater sector means greater prominence in the final SPS. With significant investment required to reduce pollution from CSOs, there is a risk that necessary improvements to the water environment through restoring sustainable abstraction in our catchments becomes de-emphasised.

We think there would be a significant downside if focus on CSOs meant water companies not being able to take positive steps in AMP8 towards realising all their environmental ambitions. Our customers tell us that they expect us to lead on making environmental improvements that are needed to put our environmental impact back in balance and that are required to take care of our communities' environment now and for all generations. We, for example, along with other companies in the south of England want and need to stop placing stresses on the rare and unique chalk stream habitats in our area through our abstraction from the groundwaters that feed them.

We know that the industry must achieve its environmental ambitions in a way that is affordable for our customers and for future generations, and strongly believe that the best way to achieve this involves an evidence-based pathway towards our ultimate environmental destination. We, for example, plan stepping down our abstraction over multiple five-year planning cycles, focusing on the most sensitive areas first will allow us to understand the environmental impact at each stage and to adjust our programme as we go so that we can check at each stage that we are making positive progress to a sustainable balance.

We recognise that multiple infrastructure sectors have increasing needs for investment, not just the water sector.

With the recent BEIS open letter to the sector regulators also calling for a conversation about intergenerational affordability between sectors to make sure that customers can afford their household bills, and the current affordability crisis in energy markets, we need a mature conversation about how household bills are paid in the infrastructure-heavy sectors and how investment is phased while continuing to support those that struggle to pay household bills.

We think that phased approaches, such as the approach to reducing abstraction we describe above, are likely to present benefits in all sectors – focus on resolving single issues in single sectors may not result in an efficient outcome as learning and innovation cannot be applied in successive phases of investment.

We recognise the urgent and pressing need to tackle difficult issues around how to keep bills affordable for all. Water is essential for life, and a certain amount per day is needed to keep us healthy and clean. We need to decide whether water companies should charge for more discretionary use of water, that go beyond the necessities to keep ourselves and homes healthy and clean. Demand for water in the spring and summer months can increase by as much as 40%, for us this means supplying a city the size of Bristol suddenly appearing in our supply area. A good portion of this can be attributed to additional water use in the garden and filling large inflatable pools, which can use as much water in a day than a family of four uses in two weeks. Our strategy includes exploring and trialling whether different charging structures such as rising block tariffs or environmental supplements to bills could be used to help keep essential water affordable for the most vulnerable in society while customers that place greater load on our systems during the summer peak would pay more.

For further information please contact Kevin Barton on: news@affinitywater.co.uk

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