Select Committee on Environmental Audit Minutes of Evidence


APPENDIX 3

Memorandum from the Drinking Water Inspectorate

ENVIRONMENTAL AUDIT COMMITTEE: Seventh Report of 1999-2000 [HC 597]

"WATER PRICES AND THE ENVIRONMENT"

RESPONSE FROM THE DRINKING WATER INSPECTORATE

INTRODUCTION

  The Drinking Water Inspectorate welcomes the Environmental Audit Committee's report on "Water Prices and the Environment"1. The report is an authoritative account of the 1999 Periodic Review process for the water industry in England and Wales, and makes a significant contribution to the development of similar processes in the future.

  The Inspectorate was happy to participate in the Committee's investigation, and is pleased to comment on the Report. The Inspectorate's response is confined to those matters raised by the Committee, which are of direct relevance to its activities, namely:

    —  monitoring and reporting on the implementation of the drinking water quality programme;

    —  reviewing its contribution to the 1999 Periodic Review process; and

    —  ensuring that adequate provision has been made for asset management, to secure long-term water quality standards for consumers.

RESPONSE TO SPECIFIC RECOMMENDATIONS

Monitoring

  Paragraph 122 The Committee recommends that a stakeholder forum is held annually to facilitate the presentation and discussion of progress on the delivery of the environment and quality programme.

  The Inspectorate has sanctioned and overseen the delivery by water companies of large capital programmes to improve drinking water quality since 1990. The Inspectorate ensures that the work is justified against regulatory requirements and reports on progress with these programmes of work.

  Programme implementation is currently monitored and reported on by various means, including collation of six monthly returns on progress with each individual scheme, regular audits and inspections, summaries in the Chief Inspector's Annual Reports, and returns made to Ofwat as part of its annual June Return. The Inspectorate will prepare a separate section in future Annual Reports on progress with the AMP3 programme of work.

The Inspectorate has also put in place special provisions for some programmes, for example, implementation of pre- and post-renovation assessment for distribution system renovation, and has provided detailed guidance for water companies on other programmes of work, such as that for lead. Briefing on progress has also been provided to Customer Service Committees and others with a local or regional interest.

  Given the extent of monitoring and reporting currently in place, the Inspectorate is not convinced of the need for a stakeholder forum on progress with the programmes of work to improve drinking water quality.

Water Quality Programme

  Paragraph 163 The Committee would welcome a report on the progress of the DWI's review of its procedures and on the adequacy of its resources.

  The Inspectorate does not accept the view of Water UK that it employed insufficient resources to handle the Period Review. It appears that Water UK's view is based on a survey2 of water companies carried out on behalf of the Inspectorate, which took place before the critical period of the Period Review.

  The Inspectorate's role in defining requirements, assessing submissions from water companies, and confirming support has already been set out in the Inspectorate's evidence to the Committee. In the period from December 1998 to March 1999 the Inspectorate adopted an iterative approach to establish the most appropriate solution for each scheme, and relevant stakeholders were consulted as part of that due process. All known schemes were assessed by the Inspectorate, and the companies were advised on whether they were supported or not, before submission of company business plans to Ofwat in April 1999.

  The resources employed by the Inspectorate delivered its commitment to the Periodic Review process fully and on time. The Inspectorate coped with the late and multiple submissions made by many water companies, despite a reminder to all companies for timely and complete submissions. In a number of cases, incomplete submissions had to be returned to companies for further development, as the Inspectorate could not support proposals on which there was inadequate information to base decisions. Additionally, almost all schemes were supported subject to caveats for resolution at a later date, reflecting less serious inadequacies in the proposals submitted.

  The Inspectorate has reviewed its procedures for handling the drinking water quality aspects of the Periodic Review. The main conclusion was to streamline the process for water company submissions in future Periodic Reviews. The Inspectorate will prepare electronic templates for all submissions, and will make clear to water companies that incomplete submissions will not be accepted. This will improve the efficiency of data handling arrangements for both the Inspectorate and water companies. Details will be discussed with all stakeholders at the planning stages for the next Review.

Developing a new approach

  Paragraph 209 The Committee therefore very much supports the initiative of the DETR, and the agreement by Ofwat, to develop a new approach. This approach should be forward-looking and should enable companies to adequately prepare to renew and repair the cohorts of sewers and mains which will come up for renewal/rehabilitation simultaneously as a result of historical peaks in building activity.

  The Inspectorate is sympathetic to the views of the Committee on the need for further development of arrangements for asset management by water companies. The Inspectorate wishes to ensure that the improvements to drinking water quality achieved over the period since 1990 are maintained.

  The quality-driven capital programme implemented since 1990 has improved or replaced a significant proportion of water treatment works and water mains, and provision has been made for further large-scale programmes of work during AMP3 and beyond. This represents a massive investment in asset improvement in a relatively short period of time, and is a significant contribution to clearing the backlog of work discovered following the introduction of regulatory standards and monitoring in 1990. As the pace of investment for quality-driven reasons slows down, however, the Inspectorate expects that appropriate levels of maintenance and renovation will be adopted to secure drinking water quality for consumers in the future.

  The Inspectorate is supportive of the direction given by Ministers on serviceability and maintenance of assets in "Raising the Quality"3. The Inspectorate is currently managing a joint DWI/Ofwat study4 with the aim of developing a set of robust serviceability indicators for water supply assets. Specific objectives include examining the adequacy of current serviceability indicators, and investigating the options for improved or new serviceability indicators used for measuring the performance of drinking water quality assets. The study will incorporate input from other stakeholders, including water companies, at an appropriate stage. An outline of the study with timescales is attached as Annex A. However, this work is but a part of the input necessary to establish a framework for determining the provision required for, and methodologies for delivering, adequate capital maintenance programmes for individual water companies. It is the Inspectorate's expectation that further initiatives will be required appropriate to a largely asset-driven industry if water quality standards are to be maintained.

REFERENCES

  1.  Water Prices and the Environment, Seventh Report of 1999-2000 [HC 597], Environmental Audit Committee, House of Commons. The Stationary Office Ltd, ISBN 0 10 268400 6.

  2.  DWI Information Letter 11/99, Feedback from Water Companies on DWI Performance in 1998.

  3.  Raising the Quality—Guidance to the Director General of Water Services on the Environmental and Quality Objectives to be achieved by the Water Industry in England and Wales 2000-2005. DETR. September 1998.

  4.  Review of Drinking Water Quality Aspects of Serviceability Relating To Infrastructure and Non-Infrastructure Assets. A joint DWI/Ofwat study currently in hand.

January 2001

ANNEX A

REVIEW OF DRINKING WATER QUALITY ASPECTS OF SERVICEABILITY RELATING TO INFRASTRUCTURE AND NON-INFRASTRUCTURE ASSETS.

The aim is:

  To develop a set of robust serviceability indicators for water treatment, supply and distribution to measure water company performance in maintaining serviceability of water supply assets, to be used to inform the determination of asset maintenance requirements.

The specific objectives are:

  1.  To improve understanding of links between drinking water quality and the operation and maintenance of treatment and distribution system assets in maintaining serviceability to customers.

  2.  To review critically current methods of measuring serviceability of water supply assets.

  3.  To investigate the options available for improvements to current indicators of serviceability for water supply assets.

  4.  To further develop any options agreed with DWI/Ofwat into serviceability measures, possibly including an overall Serviceability Index, appropriate to the measurement of performance of water supply assets in meeting statutory requirements to enable water industry regulators to measure and compare water company performance. To test these measures using data from four water companies or more if deemed appropriate.

  5.  Confirm the appropriateness of the serviceability measures developed by conducting a full-scale trial for all water companies using year 2000 drinking water quality data, June Return 2001 data, and any other data deemed necessary.

The project is split into four phases, defined and timetabled as follows:

  Phase 1: Definition "brainstorming" and confirmation of scope, information requirements and preparation of a detailed programme of work. Work completed

  Phase 2: Complete and report on Objectives 1, 2 and 3. By 28 February 2001.

  Phase 3: Complete and report on Objective 4. By 30 July 2001*

  Phase 4: Complete and report on Objective 5. By 30 November 2001*

  [*Indicative dates only. The detail of how the project will proceed will be established at the conclusion of the second phase of the project.]


 
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