Select Committee on Environment, Transport and Regional Affairs Minutes of Evidence

Examination of witnesses (Questions 160-179)



  160. So you want to get somewhere comfortable which you know you can achieve, and you can set that as a target?
  (Ms Golay) When you set leakage targets, that is within the control of the companies and, since the summit you mentioned, achievement has been pretty phenomenal whichever way you look at it—

  161. But if the targets have been pretty phenomenal, why were they unattainable when we were asking you to do something before the summit?
  (Ms Golay) We probably would agree with you on that, as we said. When you set demand targets, you are looking at ways of persuading other people to change their behaviour and there are two aspects to this. One of them is how far can you go into persuading customers, because supply is demand-led, to do that; the other is that there are costs of achieving certain targets. When you hear some pressure groups say, "Well, all the cisterns in all the households in this country should be replaced", there is a cost to that. It is possible that this cost will be considered well worth paying for the sake of protecting the water environment but how do we know which cost is well worth paying until we have had this open debate?


  162. But the debate has been going on a pretty long time.
  (Ms Golay) This debate goes on in the papers and informally in various groups, but it needs to be put on a statutory basis.

  163. So if we said in this legislation that there should only be a 5 per cent leakage rate and that water companies should be penalised if they had a higher rate, that would be all right?
  (Ms Taylor) Water companies already have leakage rates set for them by Ofwat.

  164. Yes, but it could be put in the legislation. You have just been saying that we have had the debate; we need the legislation. What I am saying is what do you want in the legislation?
  (Ms Golay) What we should have in the legislation is the mechanism whereby those targets are fixed because whatever is the right target today might change next year or the year after, so we need to have a mechanism whereby those targets can be fixed according to the values that this House represents between the environment, on the one hand, to simplify it, and the cost of protecting the environment on the other.

  165. On the question of abstraction licences, you seem a bit unhappy about the proposals in the legislation.
  (Ms Taylor) Restricting access to water resources and creating a short-term licensing regime, instead of the current long-term one, will increase costs.

  166. Why?
  (Ms Golay) In our response to DETR we have produced a table with figures that we will gladly send you demonstrating one case on how costs will increase.

  167. That is one case. What about across the board? A large number of abstraction licences are not being pursued by even the water companies who have rights to withdraw, so why should they not surrender those rather than keep them and run the risk at particular times of using them to other people's disadvantage?
  (Ms Taylor) Can I say that we are not opposed to change or to proposals as regards change. What we want to see, though, is an understanding of the impact of that change so there will be an increase in costs. Now if it is decided that that is acceptable then that is fine. We understand that there will need to be changes—we are not objecting to that at all.

  168. I am not convinced that there needs to be any increase in costs. If your members were more efficient, they would need less water therefore there would not be a problem if they had to surrender some of their abstraction licences?
  (Ms Taylor) It is not our members using the water but their customers so, as far as supply is concerned, it is led by the demand.

  169. It is led by your leakage to a certain extent. Very few companies actually abstract more than is excessive leakage?
  (Ms Taylor) No, that is not true. We are obsessional and fanatical about leakage and have continued to be so, and we are meeting the targets set for us. For example, during the winter that we have had with the severe floods and then the freezing and the thawing, we have not said a word other than getting on with our job. We have just got on with it. It is perfectly true to say that the results we have had as regards leakage have been phenomenal and, yes, we are fanatical about that. In terms of water resources, it is part of an equation. Part of that is how much water is used and, as I said earlier, we have a statutory responsibility as regards safeguarding the use of water and, of course, it is in everybody's interest to do that. The other part is developing new resources as you need them. When it comes to abstraction licensing, we are saying that it could mean an increase in costs. Because this is a long-term industry, if a company is to develop a resource which then it no longer has the right, if you like, to use, then you have stranded that resource and you have spent money. If that is considered desirable and is part of an open debate, we do not have a problem with it. What we are saying is please, can we have that open debate.
  (Mr Pocock) That is certainly a point and perhaps I can mention two other aspects. If you are moving an investment in an asset from a long-term to a short-term basis, inevitably the way you invest in that asset will change. For example, the balance between initial capital investment compared to an operating cost solution may well change, therefore the total cost will be very much shorter than long term, and we believe that may well increase costs long-term. The second point I would like to make would be that, when you are restricted in terms of access to water in one particular area yet whilst you are still working on demand management there is still a need to maintain supplies in the short term, then you have to look to replace that water and, where there is an area, for example, of high utilisation of resources, inevitably the replacement of that water tends to be from further afield, more costly, with greater pollution. These will all attract greater costs.

  170. You think, therefore, it is perfectly reasonable to remove some licences where they are now creating environmental damage?
  (Ms Taylor) We think it is perfectly reasonable for any changes to be made as regards licensing. What we are saying is that the impact of those changes should be readily understood. That is all.

  171. What about this question of sleeper licences? Surely they should go? If someone has not used them for four years, is it not reasonable for the Agency to take them away?
  (Ms Golay) Droughts do not happen in regular four-year cycles, and those sleeper licences may be used for cases of drought happening only every ten or fifty years but they are still needed for those emergency situations, and if they are not there when they are needed then we will have a reduction in supply or problems with supply and people will wonder why we did not build up reserves and contingency plans.

  172. But if you find that someone has not used them for four or five years, then surely it is perfectly reasonable to look for alternative supplies if they lose the right to draw that water?
  (Ms Taylor) It is perfectly reasonable to ask the question, and the answer may vary. As Jeanne says, there may not have been a drought in that particular area for four years but there may be after that, so the company concerned will have had to have built up resources elsewhere. Now, if there are restrictions on how else it can build resources, it is just a question of balance, that is all.

  173. Does this mean you do not trust the Agency? Is it not sensible to put these powers in and leave it to the goodwill of the Agency?
  (Ms Taylor) It is not that we do not trust the Agency but the Agency has a main duty to protect the environment; not a duty to supply water. We do. The Agency merely has to have a regard that we have a duty to supply water so it is not a question of not trusting, but what we were coming back to earlier, which is the Agency should be looking at these issues—absolutely right—and it is then going to be a question of balance and discussion as to what is the right way forward. We are certainly not saying the Agency should not have the powers—

  Chairman: But it does not seem sensible, if there is going to be discussion, to give the Agency the powers, because then you have to persuade them that, in a particular case, they are exercising them unreasonably?

Mrs Dunwoody

  174. What are you so terrified of?
  (Ms Taylor) I do not think we are terrified of anything.

  175. Well, you are giving a very strong impression that you are?
  (Ms Taylor) Then I must apologise.

  176. Not you personally; I am talking about the evidence. If it was just you, I think you and I could deal with that quite easily, but you give the impression that you are saying, on the one hand, "Oh, yes, they should have these powers but that really we do not think they are ever likely to need to do anything with them because they do not have the same responsibilities as we do". That is nonsense.
  (Ms Taylor) If we are saying that the Environment Agency's overriding responsibility is to protect the environment, we then have our responsibility as regards supplying our customers, and Ofwat with their responsibilities, and what we are saying is we would then like the DETR to hold the ring as regards—

  177. Fine. Nobody disagrees with that but why does that automatically negate powers in the Bill?
  (Ms Taylor) It does not necessarily.

  Chairman: So it is perfectly all right to give the Environment Agency this power?

Mrs Dunwoody

  178. So we are back where we started. It is perfectly all right to give them the power in the Bill?
  (Ms Taylor) The Bill is incomplete in the way in which it explores this. We are willing to continue to explore it, but with the Bill as it is at the moment it is very difficult to see how that balancing decision is going to be made—


  179. But in the Bill it gives the power to the Environment Agency, so surely that is clarity?
  (Ms Golay) What we have in the Bill is the power to remove the sleeper licences. There is also the requirement on the companies in the Bill to have drought emergency plans. We asked, therefore, when we discussed the Bill with DETR whether there could be a connection between the existence of a drought emergency plan and sleeper licences that would guarantee that the sleeper licences that had been removed because they are not used except in drought would be reinstated or protected or somehow treated differently because they are required for the furthering of the drought emergency plans. The answer is there were no provisions or intentions to make that link. If the Bill had this link that said that sleeper licences are removed except that they can be re-used in drought circumstances—and there are, for instance, in the 1999 Act, circumstances where the Secretary of State can proclaim an area to be under water stress—then we would be satisfied that the balancing duties and responsibilities are there in the Bill, not only of removing but also of bringing back into use when required.

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