Meeting the Demand for Water

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Published: 23 January 2007

Meeting the Demand for Water

Ofwat has secured better data on the amount of water leaking from water companies’ systems, according a report to Parliament by Sir John Bourn, head of the National Audit Office, but there is uncertainty over the effectiveness of water efficiency projects that seek to help consumers waste less water.

The Water Services Regulation Authority (Ofwat) is the economic regulator of the supply & demand for water in England and Wales and its broad purpose is to regulate in a way that enables companies to secure sustainable supplies at the lowest cost to the consumer.

To achieve this it aims to collect relevant & reliable information to underpin its regulatory decisions, provide incentives for water companies to meet future demands and take appropriate enforcement action if companies do not respond to Ofwat’s incentives.

According to the NAO, Ofwat has secured better data on leakages, but calculations of leakage still depend on estimates of actual consumption. Consumption figures, even within the same region, range between 124 and 177 litres per person per day.

It is not currently clear how much of this difference is due to socio-economic or other factors affecting water use, as opposed to inconsistencies in consumption estimations, nor the impact that these differences may have on the aggregate projections of demand.

Ofwat’s approach to setting leakage targets is sensible and supported by 62% of consumers surveyed.

Companies have to bring down leakage to the level where the cost of saving another unit of water through fixing a leak is the same as the cost of providing a unit of water through a new supply.

Allowing a level of leakage which is economic rather than reducing leakage levels to zero prevents charges to customers from rising unnecessarily.

Demand for water is expected to increase in parts of the country and there are pressures to reduce the amount of water abstracted from rivers and other sources.

Evidence from the 2006 drought demonstrates that companies and consumers respond to non-financial incentives during a drought.

For example, Anglian Water adopted a policy of prioritising all visible leaks and consumer demand in the Thames region was 8% less than the norm for the middle of summer.

62% of consumers in water-stressed areas stated they would be more likely to conserve water if water companies themselves conserved water.

The report also points out that evidence on the results of water efficiency projects is growing. Ofwat has co-funded research which it hopes will produce more reliable evidence and has published a good practice register.

However, the evidence does not yet enable Ofwat to say which projects are most effective in helping consumers waste less water.

Ofwat sets leakage targets for each of the 22 water companies.

Thames Water has persistently failed to meet its leak targets since 2000. In 2006, Thames Water gave an undertaking to Ofwat under which the company has committed to renewing 368 km of pipes at a cost of £150 million, the cost of which is to be met by shareholders and not passed to consumers.

However, the NAO feels that Ofwat will need to act quickly & firmly against any breach of the agreement as it monitors Thames’s compliance.

To meet the future challenges of water supply, the National Audit Office recommends that Ofwat should:

· press water companies for improved data on leakage & consumption and push for a sustainable approach to leakage management

· take a lead in ensuring that there is reliable evidence for the effectiveness of water efficiency projects, and

· also assess companies’ progress on water efficiency programmes based on quality, the amount of water they save and number of consumers reached

Sir John Bourn said:

“A good understanding of the needs of water consumers should be at the heart of Ofwat’s regulatory regime.

The regulator must work to achieve robust and reliable data on how consumers use water and on how effective water efficiency projects are in conserving water. This data can then be used to underpin its regulatory decisions.

In the case of leakage problems in the Thames region over the last six years, Ofwat has now taken direct action with a view to protecting the consumer.

It must ensure, in future, that its enforcement actions are timely and focused on the consumer.”

Dame Yve Buckland, Chair of the Consumer Council for Water, said:

"Consumer views and understanding of consumer behaviour must be at the centre of any future regulatory decision-making on water policy.

We are happy to see the National Audit Office recognise this, echoing many of the statements we have made on water resources over the last 12 months.

Emerging results from our Using Water Wisely research will help in providing the necessary evidence, but more work is needed on top of that to work out the costs and impacts of different water efficiency initiatives."

Dame Yve added:

"It is crucial, if customers are to be asked meet extra costs at the next price review in 2009, that they pay only for the approaches that work best for different groups of consumers in differing supply scenarios. Otherwise, water companies may not deliver the options that are best value for money.

Meanwhile, the message to consumers is to minimise waste and use water wisely: but the industry must also demonstrate what it is doing to take care of water resources, and how it can help consumers to be more water efficient.

Customers are saying 'show me how' - the will is there, but they need help with the means."

Topline findings of the Consumer Council for Water's Using Water Wisely research show that:

· 67% of consumers were willing to trial water-efficient devices

· 54% were willing to give spray taps a try to save water

· 56% were willing to try save-a-flush bags and other toilet cistern water savers,

· but 55% of consumers would be more likely to conserve water if water-saving appliances were cheaper

Further information

NAO: Meeting the Demand for Water

Executive Summary

Using Water Wisely, a report by the Consumer Council for Water

Using Water Wisely - quantitative research

Consumer Council for Water (CCWater)