Magazine article Public Finance

Stemming the Flow

Magazine article Public Finance

Stemming the Flow

Article excerpt

There are few more beguiling prospects than a mountain stream tumbling its way down through rocks on a verdant hillside. When it is gushing down your high street at a thousand litres an hour, the charm quickly evaporates.

According to the latest figures, recorded leakage in England and Wales in 2004/05 averaged 3,609 million litres a day. That's several Niagaras every half an hour going down the drain.

Nonetheless, the industry regulator, the Office of Water Services, has a good news story to tell. Its latest report, published on September 28, Levels of service for the water industry in England and Wales 2004/05, insists that all 23 water companies are 'approaching the maximum score in its overall performance assessment (OPA).

The number of properties at risk of low water pressure fell from 9,400 in 2003/04 to 7,400 in 2004/05. The number of properties affected by unplanned and prolonged interruptions to supply (defined as more than 12 hours) decreased to 15,400 from 32,500 the previous year. Of these, 6,800 were caused by an exceptional storm in the Northumbrian region that swept away the two mains supplying Hexham.

Floods last month across the English Northwest and much of Wales are similarly likely to skew the current year's figures. In 2003/04, too, the vast majority of such supply cuts - 26,300 - were caused by just three large water main bursts in the Thames region, which were complicated and time-consuming to repair, the regulator says.

The number of homes at risk of internal sewer flooding at least twice in ten years remained stable at 3,100; 6,400 properties were at risk of sewer flooding once every ten years, compared with 6,800 in 2003/04.

In addition, the quality of drinking water - as monitored by the Drinking Water Inspectorate - is almost perfect, and 99% of bathing waters met mandatory standards.

Ofwat's director of competition and consumer affairs, Tony Smith, says: 'We are naturally very pleased to see the companies are generally maintaining their high standards of service. But we will continue to work with the Drinking Water Inspectorate and the Environment Agency to monitor the companies closely.'

More jaundiced observers, especially those with the mountain stream in the high street, might raise questions over the marking criteria. As with A grades at A-level - if everyone is getting top marks, what are they worth?

'I understand the A-level analogy,' says Zoë Howard, Ofwat's spokeswoman. But her answer is much the same as you'd get from the Department for Education and Skills. 'I am pretty sure that they [the water companies] have all improved so much in recent years over previous OPA maries, and that is why they are nearing the maximum score. It may be that we ought to revise those benchmarks upwards, though we have not thought of doing so yet. We wouldn't want to be unfair on the companies.'

As a result of regulation, says Ofwat, the industry has achieved huge improvements across a range of services. Water companies are investing £5.5bn over the period 2005 to 2010 (more than £3m every day), we are told, to improve drinking water and protect the environment. The investment between 1989 and 2010 will be more than £65bn.

In 2005, the average daily cost for water and sewerage services is 76p for households. A litre of tap water, supplied and taken away, now costs just 0.17p. Ofwats price limits mean water bills should not rise by more than 3.1% a year above inflation. The next price review will be in 2009.

But the latest leakage report, published in July, paints a bleak picture.

True, only two companies - Thames Water, losing 915 megalitres per day (a megalitre is 1 million litres) and United Utilities, losing 500 - missed their 'targets', set by Ofwat after consultation with the Department for Environment, Food and Rural Affairs.

Ofwat head Philip Fletcher, the director general of water services, seems modestly content, even though he describes leakage in London as 'unacceptably high'. …

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