NOVEMBER/EARLY DECEMBER REVIEW

Key items to note this month include:

  • Cave Review
  • Ofwat and water efficiency
  • Bathing Water standards
  • Climate Change, Energy and Planning Bills enacted
  • Marine and Coastal Access Bill

Viewpoint

A very merry Christmas to all our readers.

These are interesting times for the water industry. As mentioned below the interim report of the Cave Review proposes, as had been anticipated, a major extension of commercial consumer choice in relation to water and sewerage services and the hiving off of water companies retail water and sewerage services into separate divisions. Together, according to Defra, these measures will reduce costs and increase service levels for all customers, and support the more efficient use of water and also allow companies to better meet the challenges facing the industry including climate change, containing costs, rising consumer expectations and water efficiency. This is easily said but not easy to achieve Interestingly, Standard and Poor issued a issued a report on 13 November suggesting that enhanced competition could alter its assessment of business and financial risks in the sector and therefore its ratings on water utilities in England and Wales. Maybe, in the new economic circumstances that are unfolding, some revised assessment of the economics of the water industry will have to be factored in.

What ultimately would be the consequence of, as it has been described, unbundling the value chain by vertically separating contestable markets from natural monopoly activities in both water and wastewater? It is quite difficult to conceive. Water retailers would buy services from a single regional wholesaler – the present incumbent – who would sell at an average price to all retailers, allowing a system of cross-subsidy between different customers where this was desirable. However, there are real practical difficulties in establishing a competitive retail market and, as the Cave Review concedes. currently, the evaluation of costs and benefits for household competition is not favourable though it is hoped that by 2014 it may be possible to make a clearer and perhaps favourable analysis. The Review goes on to speculate that, possibly after 2015, an independent procurement entity could be established to buy water and wastewater services from suppliers and sell them to retailers., it in turn to be replaced at a later stage by a pool or bilateral market as in the gas and electricity industry. These are hugely challenging concepts and it remains to be seen whether it can be shown that the cost and complexity of introducing competition really can deliver the much vaunted benefits that are aspired to. Somewhat understandably, the response to date from the water industry has been quite guarded. CCWater, whilst welcoming the proposals, is also somewhat reticent, noting that customers have mixed feelings as to whether or not they would like to choose their water or sewerage provider. As it has pointed out, ‘the government needs to decide if competition in the water industry could realistically deliver [reduced costs]. If not, customers will need to be convinced of how competition would, in practice, benefit them. They will also want assurances that lessons have been learned from mistakes in other sectors.’ Evidently, less than half of those surveyed (48%) thought that competition in gas and electricity has been good for customers.

Meanwhile, whilst wrestling with the issues posed by the Cave Review, water companies must come to terms with the more immediate challenges posed by the latest Ofwat pronouncement that that it has set a target for water companies to increase water efficiency savings from 2010 by 40%. Whilst this is arguably in keeping with the Government’s water policy document earlier this year Future Water, Ofwat has dramatically raised the stakes by declaring that it will not allow customers’ bills to rise to achieve these targets, which will be introduced on a trial basis from April 2009 and come into full effect in 2010. Ofwat points out that Germany already meets the UK Government’s target of household consumption of 130 litres per day compared to the UK’s of more than 150, with average consumption in Germany being reduced by 15 per cent (22 litres) between 1990 – 2005 to 125 litres per household per day. Such statistics however inevitably mask massive administrative, economic, social and logistical differences. Whilst Ofwat says that water companies must deliver savings by providing household and business customers with information on how to use water sensibly and by promoting the use of water saving devices, it is surely the case that much more will be needed if these ambitious targets are to be met. As water companies refine their new water resources management plans and business plans for settlement in 2009, the challenges which they face in relation to these issues at least should make 2009 an interesting year.

GENERAL

Bathing Water standards

Defra announced on 13 November that ninety–six per cent of England’s bathing waters met the minimum water quality standards set by the European Bathing Water Directive this year and 65.7 per cent met the highest guideline standards according to tests carried out by the Environment Agency. Other results this year show:

  • Of the 414 bathing waters in England, 398 met the mandatory standards;
  • Only 16 failed the standards, meaning there was a compliance rate of 96.1 per cent; and
  • A total of 272 waters met the UK’s much tighter guideline standard.

Meanwhile, in Wales, the Welsh Assembly Government announced that 80 of the 81 beaches tested passed the mandatory bacteria standard and a further 62 (76.5%) met the more stringent standards. Evidently the Environment Agency is now investigating the one failure, at LLandanwg in Gwynned which may have been due to poor weather conditions.

http://www.defra.gov.uk/news/2008/081113a.htm

http://wales.gov.uk/news/latest/081113bathingwater/?lang=en

More assistance to councils with flooding

CLG announced on 7 November that that 25 councils helping over 1,500 flood-hit families pay their council tax bills will share over £1.2 million Government funding.

http://www.communities.gov.uk/news/corporate/1053825

Infrastructure survival toolkit

The Institute of Asset Management announced on 25 November the publications of its 3 part survival pack – the IAM Toolkit – designed to help the owners of major public and private-sector assets cope with the double onslaught of unprecedented economic and environmental risks.

http://www.theiam.org/iam/filemanager/root/site_assets/downloads_-_knowledge/public_affairs/press_releases/iam_press_pack_general_-_final.doc  

2009 BW Boat Licence fees

BW announced on 25 November increases for England and Wales ranging from 7.5-8.5%, less than the 11.2% increase previously envisaged.

http://www.britishwaterways.co.uk/newsroom/all-press-releases/display/id/2316

Advanced BW spend

BW announced on 3 December that the Government has brought forward £5m from its 2010-11 grant for investment in 2009/10 as part of the package of measures to give a fiscal stimulus to the economy.

http://www.britishwaterways.co.uk/newsroom/all-press-releases/display/id/2321  

Environment Agency lock houses

After much public concern, the Environment Agency announced on 4 December its revised proposals for lock houses. This would see a resident lock and weir keeper at each of its 45 lock sites along the River Thames.

http://www.environment-agency.gov.uk/news/99631.aspx?month=12&year=2008  

MCA report on MSC Napoli incident

On 6 November the MCA delivered its 103 page report to the chairman of Devon’s local inquiry into the circumstances leading to the beaching of the MSC Napoli off the East Devon coastline.

http://www.mcga.gov.uk/c4mca/mcga07-home/newsandpublications/mcga-publications/mcga-napoli-report.htm

Environment Agency, energy generation and a green new deal

The Environment Agency has announced proposals to generate its own renewable energy – enough to power a city the size of York – at its sites across England and Wales. Additionally, its Chairman, Lord Chris Smith,has urged the Government to follow Barak Obama’s example and launch a ‘Green New Deal’ for the UK economy to drive investment in clean energy and create jobs.

http://www.environment-agency.gov.uk/news/99482.aspx?page=2&month=11&year=2008

http://www.environment-agency.gov.uk/news/99486.aspx?page=3&month=11&year=2008

Thames Water respond to new reservoir consultation

On 5 November, Thames Water published a report on the public feedback to its proposals for a new reservoir in Oxfordshire.

http://www.thameswater.co.uk/cps/rde/xchg/SID-A5B5EDED-B4D8334D/corp/hs.xsl/8125.htm  

World water toilet day 19 Nov

World toilet day was held this year on 19 November. As highlighted by Water UK, this is supported in various ways by the UK water industry. http://www.water.org.uk/home/news/press-releases/world-toilet-day-2008

Europe’s first carbon auction

The Financial Times and others reported that the UK held Europe’s first carbon auction on 19 November, raising £54m from sales of 4m allowances to emit carbon under the EU’s emissions trading scheme.

http://us.ft.com/ftgateway/superpage.ft?news_id=fto111920081233293092&page=2  

REGULATORY NEWS

Cave Report

Defra announced on 18 November the publication of the interim report by Professor Martin Cave into competition and innovation in water markets. The report sets out Professor Cave’s recommended measures for increasing retail competition in the water industry which, it is claimed, could benefit customers and the economy by up to £600 million over the next 30 years and deliver considerable environmental and service improvements.

The Cave Review recommends:

  • the introduction of legislation to allow 28,000 then 162,000 large public and private sector organizations in England and Wales to choose their water and sewerage retailer for the first time.
  • retail divisions of water companies should be made legally independent from their network business.
  • a series of changes to incentivise new water and wastewater suppliers to enter the market.

The final report is due to be delivered in Spring 2009.

http://www.defra.gov.uk/news/2008/081118b.htm

http://www.defra.gov.uk/environment/water/industry/cavereview/pdf/cavereview-report.pdf

http://www.water.org.uk/home/news/press-releases/cave-review-interim-report

http://www.ccwater.org.uk/server.php?show=ConWebDoc.1949

Independent (Walker) Review of Prices and Metering

A call for evidence from the independent review of charges for household water and sewerages services led by Anna Walker was announced by Defra on 14 November. Responses are required by 19 December.

http://www.defra.gov.uk/news/2008/081114a.htm

Ofwat water supply and demand policy and water efficiency

Ofwat set out on 19 November its position on key aspects of water supply and demand policy including water efficiency targets, leakage, metering and climate change.

It also highlighted by way of a press announcement on 20 November that it has set a target for water companies to increase water efficiency savings from 2010 by 40%. Ofwat says that companies must deliver savings by providing household and business customers with information on how to use water sensibly. They must also promote the use of water saving devices. The water efficiency targets exclude savings from supply pipe repairs and replacements. Ofwat goes on to say that it will not allow customers’ bills to rise to achieve these targets, which will be introduced on a trial basis from April 2009 and come into full effect in 2010. The targets, it says, will help companies play their part in achieving the Government’s long term ambition of reducing individual water usage to 130 litres per property per day from its current level of around 150 litres.

http://217.199.176.110/pricereview/pr09phase2/pr09phase2letters/ltr_pr09_watersupdempol  

http://217.199.176.110/mediacentre/pressnotices2008/prs_pn3608_wateffsav  

United Utilities announce new drainage charging structure

United Utilities announced on 11 November a new way of charging non-household customers for surface water and highways drainage as recommended by Ofwat. The new charges, which are being phased in between now and 2011, will be banded according to the footprint of a property and the external drained area of its site.  

http://www.unitedutilities.com/2591.htm  

POLICY INITITIATIVES

Agreement reached on Marine Bill and devolution The Cabinet Office announced on 27 November that the UK Government and the devolved administrations in Northern Ireland, Scotland and Wales have reached agreement on a UK–wide approach to marine planning.

http://www.cabinetoffice.gov.uk/newsroom/news_releases/2008/081127_jmc.aspx

Eco standards for eco towns

The draft Eco Towns PPS published by CLG on 4 November sets out the UK’s toughest ever green standards for new development, including achieving zero carbon status across all the buildings in the eco-town and allocating 40 per cent of the area within the town to be green space. The PPS also pledges that individual eco-towns will need to submit planning applications in the same way as any other major development proposal. The consultation period runs till 19 February.

http://www.environment-agency.gov.uk/news/99156.aspx?page=4&month=11&year=2008

Places matters – the location strategy for the UK

CLG published on 25 November a new strategy to tackle problems from traffic management to flooding, improved policy formulation and decision making by using better geographical information.

http://www.communities.gov.uk/news/corporate/1072942

Building a low carbon economy – the UK’s contribution to tackling climate change

The new Climate Change Commission (given a statutory basis by the new Climate Change Act 2008) published this report on 1 December.

http://www.theccc.org.uk/reports/

Marine Works Licensing

A new DEFRA consultation: on an amendment to the Marine Works (Environmental Impact Assessment) Regulations 2007(Consultation) was published on 27 November.

Defra and the Welsh Assembly Government have also now produced a new guide to licensing under the Marine Bill.

http://www.defra.gov.uk/corporate/consult/marine-works/consultation.pdf  

http://www.defra.gov.uk/marine/pdf/legislation/marine-licensing.pdf  

Further FoI Guidance

The Information Commissioner issued on 5 November updated guidance to help public authorities deal with vexatious requests. Amongst other recent developments, it may also be noted that the Information Commissioner ordered the CLG to improve its handling of FoI requests.

http://www.ico.gov.uk/upload/documents/pressreleases/2008/vexatious_request_guidance_051208.pdf  

http://www.ico.gov.uk/upload/documents/pressreleases/2008/clg_practice_recommendation.pdf  

Water Saving Group final report

The Water Savings Group met for the last time on 20 November, Defra publishing the following day a press notice recording the active contribution which it has made to improving water efficiency.

http://www.defra.gov.uk/news/2008/081121a.htm

NEW CASE LAW

Lack of appropriate assessment for SSSI used in argument for maintaining sea defences.

77 year old resident of Southwold, Peter Boggis has obtained a High Court ruling that Natural England’s decision to declare cliffs a SSSI and thereby prevent him from maintaining sea defences was unlawful, the intention behind the SSSI being to allow the destruction of Mr Boggis’s ‘soft sea defences’ and the rapid erosion of the cliffs behind them which amounted to a plan or project which might affect a SPA and for which no appropriate assessment had been carried out. Natural England has defended its position.

R (on behalf of P.C. Boggis) v Natural England 2008 EWHC 2954

http://www.bailii.org/ew/cases/EWHC/Admin/2008/2954.html  

http://www.naturalengland.org.uk/press/news2008/051208.htm  

Application of EC Directive to fish farms

The European Court of Justice ruled on 6 November in a case concerning freshwater fish farms in France that article 6 of Directive (EC) 2006/11, on pollution caused by the discharge of certain dangerous substances into the aquatic community, could not be interpreted as allowing the member states, once programmes to reduce water pollution including environmental quality standards had been adopted under that article, to introduce a declaratory scheme, in respect of facilities regarded as being low-polluting in nature, subject to a reference to those standards and a right for the administrative authority to object to the commencement of the operations or to impose limits on discharges specific to the facility concerned.

Association nationale pour la protection des eaux et rivieres - TOS v Ministere de l’Ecologie, du Developpement et de l’Amenagement durables (Case C-381/07)

http://www.bailii.org/cgi-bin/markup.cgi?doc=/eu/cases/EUECJ/2008/C38107.html&query=Association+and+nationale&method=boolean  

JR fails in relation to wind farm

The House of Lords confirmed the decision made at first instance in this case to reject an application challenging the grant of planning permission on the basis that it had not been made sufficiently promptly although within the 3 month period. Andrew Finn-Kelcey v Milton Keynes Council and MK Windfarm Limited EWCA Civ 1067

http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWCA/Civ/2008/1067.html&query=kelcey&method=boolean

LEGISLATIVE DEVELOPMENTS

Climate Change Act 2008

Enacted on 26 November, it is intended to create a new approach to managing and responding to climate change in the UK, through setting ambitious targets, taking powers to help achieve them, strengthening the institutional framework, enhancing the UK’s ability to adapt to the impact of climate change and establishing clear and regular accountability to the UK, Parliament and devolved legislatures. On 1 December, the Committee on Climate Change was established as an independent body and proceeded to provide advice to Government on the first three carbon budgets and its full review of the 2050 target.

http://www.defra.gov.uk/environment/climatechange/uk/legislation/index.htm  

Energy Act 2008

Enacted on 26 November, this Act implements the legislative aspects of: Meeting the Energy Challenge: A White Paper on Energy (May 2007) and Meeting the Energy Challenge: A White Paper on Nuclear Power (January 2008). Provision is included in relation to carbon capture and storage (CCS), creating a regulatory framework to enable private sector investment in CCS projects. CCS has the potential, it is thought, to reduce the carbon emissions from fossil fuel power stations by up to 90%. Provision is also made for strengthening the Renewables Obligation to drive greater and more rapid deployment of renewables in the UK. This will increase the diversity of the UK’s electricity mix, thereby improving the reliability of our energy supplies and help lower the carbon emissions from the electricity sector.

Planning Act 2008

Enacted on 26 November, the Act introduces a new system for approving major infrastructure of national importance. Key changes include the following:

  • decisions would be taken by a new Infrastructure Planning Commission
  • decisions would be based on new national policy statements
  • the hearing and decision-making process by the Commission would be timetabled
  • the new regime would be used for energy developments like nuclear power
  • the Secretary of State would no longer have the final say on major infrastructure decisions
  • there would be a new Community Infrastructure Levy on developments to finance infrastructure. The idea of this would be to raise money from developers to pay for facilities needed as a consequence of new developments, such as schools, hospitals and sewage plants.
  • planning appeals for minor developments would be heard by a panel of local councillors rather than by a planning inspector.

Planning and Energy Act 2008

Enacted 13 November, this Act which was passed as a Private Members Bill allows local planning authorities to set requirements for energy use and energy efficiency in their development plans.

Queen’s Speech and new legislation

Only 13 ‘full’ Bills were announced in the Queen’s Speech on 3 December, with the emphasis having changed since the Draft Legislative Programme was announced earlier in the year to focus on addressing the recession. Three Bills are worth mentioning here:

The Business Rates Supplement Bill - not actually referred to in the Queen’s Speech but previously heralded. It would give big metropolitan and county councils the right to levy up to 2p extra on business rates to support long term infrastructure projects.

The Local Democracy, Economic Development and Construction Bill – places a duty on local authorities to monitor elections and promote democracy, including making it a legal requirement for councils to respond to petitions whilst imposing a new duty on them to assess the economic conditions in their area. The National Tenant Voice will be set up to ensure that the concerns of tenants are central to housing development. Provision is also made to separate the Boundary Commission from the Electoral Commission. Essentially, the Bill brings forward some of the recommendations of the Empowerment White Paper with the Sub-National Review together with additional measures to support the construction industry.

The Marine and Coastal Access Bill – follows on from the draft Bill published in the last session, the Government responding in September to the Joint Committee’s detailed report issued in July and a separate report from the Commons’ EFRA Committee. The Bill would create a new Marine Management Organisation as the UK Government’s strategic delivery authority in the marine area, as well as introducing national marine spatial planning and reforming marine licensing. Whilst few aspects of the Bill have direct application to the devolved administrations (the Scottish Executive has just consulted on its own separate draft Bill and separate legislation is planned for Northern Ireland), as mentioned elsewhere in this newsletter, it was announced on 27 November last that the UK Government and the devolved administrations in Northern Ireland, Scotland and Wales have now reached agreement on the UK-wide approach to marine planning. The Bill will also create a national coastal footpath around England, with Wales arranging its own affairs on this issue. Natural England are currently carrying forward consultations on proposals for the actual route.