Select Committee on Public Accounts Eighth Report


EIGHTH REPORT


The Committee of Public Accounts has agreed to the following Report:—

OFFICE OF WATER SERVICES (OFWAT): LEAKAGE AND
WATER EFFICIENCY

INTRODUCTION AND SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS

1. Reducing the level of leakage and promoting the efficient use of water by customers can reduce the costs of water companies and hence the charges paid by customers, for example by delaying the need to develop new sources of water supply. It can also help water companies maintain a safe margin between the demand for water and the amount they can supply, without damaging the environment.

2. The Office of Water Services (OFWAT) regulate the economic activities of the 24 water companies in England and Wales. OFWAT are responsible for enforcing the companies' duties to develop and maintain an efficient and economical system of water supply and in doing so they have a duty to seek to promote economy and efficiency on the part of water companies and to protect the interests of customers.

3. The importance of controlling leakage became apparent in 1995 when Yorkshire Water experienced severe difficulties in maintaining supplies to their customers in West Yorkshire. At that time, across England and Wales over 30 per cent of the water put into supply was being lost through leakage. In 1997 the Government stressed the importance of reducing leakage and promoting the efficient use of water by customers, and presented a ten-point plan which included the setting by OFWAT of mandatory leakage targets.

4. On the basis of a report by the Comptroller and Auditor General, we examined the quality of information available to OFWAT to set leakage targets, OFWAT's success in securing reductions in leakage, how OFWAT take the environmental impact of leakage into account, and progress on encouraging the efficient use of water. Four main points emerge from our examination:

  • In any event, most companies have still not achieved their economic level of leakage. Leakage has fallen by a third since 1995, and the risk to customer supplies has fallen too. Some companies have reduced leakage to what OFWAT accepts is the economic level. But 18 of 24 water companies have not reached their estimated economic levels of leakage. And several of the companies with the highest levels of leakage, notably Thames Water, operate in areas where water is in potentially short supply. OFWAT should press such companies to fulfil their duties to customers by reducing leakage.

  • Where reducing leakage would enable environmental damage to be reduced OFWAT should consider setting companies targets below their economic level of leakage. Leakage increases the amount that needs to be put into supply and hence can be environmentally damaging, for instance because rivers dry up or reservoirs have to be built. OFWAT have not set targets below the estimated economic level of leakage, although these estimated levels do not take environmental impacts fully into account. OFWAT should consider, in consultation with the Environment Agency, the case for setting lower leakage targets where this can be justified to protect the environment.

  • OFWAT should identify which water efficiency measures are the most effective in helping customers waste less water, and share this information with water companies. Customers, such as schools, who pay for the amount of water they use can obtain substantial benefits by wasting less water. Although reducing waste can benefit all customers in areas where water is in short supply, but the cost effectiveness of individual measures to improve the efficient use of water such as fitting cistern devices is uncertain, and guidance supplied by water companies to their customers is variable. OFWAT should take the lead in identifying which measures are the most cost-effective, and do most to encourage water companies to act on their findings.

5. Our more specific conclusions and recommendations are as follows:

QUALITY OF INFORMATION

      (i)  OFWAT consider that an acceptable level of leakage is the point at which the cost of reducing leakage equals the cost of providing water from other sources (the economic level of leakage). Figures for the amount of leakage are, however, imprecise because the total amount of leakage is not measured directly, for example by household water meters. Instead, OFWAT rely on assumptions about water consumption in the 80 per cent of households that do not have water meters, and these assumptions vary considerably across the country. Uncertain information about domestic consumption means that company estimates of leakage could be subject to manipulation and the impact of water efficiency actions cannot be reliably measured. These uncertainties call into question the reliability of OFWAT's analysis of the economic level of leakage (paragraph 14).

      (ii)  The variations in estimates of unmeasured consumption, and hence leakage, are in part a result of different characteristics of households across the country. But they may also be a result of differing approaches taken by companies to estimating domestic consumption. Factors such as the number and ages of children in households and how many people are employed are likely to have a significant bearing on water consumption, but the way companies estimate domestic consumption involves a high degree of aggregation and therefore may not reflect such factors. We recommend that OFWAT review their guidance to companies to ensure that companies compile their estimates of leakage with greater consistency (paragraph 15).

      (iii)  The Environment Agency have a zonal approach to monitoring water resources, which recognises that, even for a company with an adequate demand-supply balance overall, some zones will have tight water supply conditions. Conditions can vary considerably between the zones served by some companies, such as Thames Water. OFWAT told us that they were considering whether to set leakage targets for zones rather than for companies as a whole, where appropriate. We can see considerable advantages in OFWAT moving in this direction so as to focus on those zones with little margin between water demand and supply (paragraph 16).

      (iv)  There is a wide variation in company estimates of the long run marginal cost of water, including both the short and long term costs of an increase in the supply of water. The variation from company to company may reflect differences in the balance of water demand and supply, in particular over the amount by which projected demand has to rise before a company would need to develop expensive new sources of water such as reservoirs. It may also be a result, however, of inconsistent methodologies. We recommend that OFWAT should require companies to use consistent and robust methodologies (paragraph 17).

Securing Reductions in Leakage

      (v)  Although 18 of 24 companies have not yet reached their economic level of leakage, OFWAT expect all water companies to reach their economic level by 2002-03. Even if water companies achieve this further marginal improvement, leakage will still represent 19-20 per cent of all water put into supply. OFWAT believe that technology may reduce the economic level of leakage in the future. OFWAT should continue to monitor the position carefully, adjust companies' leakage targets accordingly, and press them to meet these targets (paragraph 29).

      (vi)  Some of the water companies which are well above their level of economic leakage also have little margin between the demand for and supply of water. In these areas it is important that companies continue to make concerted efforts to limit leakage as far as possible. OFWAT should ensure that these companies reduce leakage to the economic level, and should apply sanctions to any companies that are not acting vigorously enough to improve their leakage performance (paragraph 30).

The Environmental Impact of Leakage

      (vii)  In some areas with tight water resources, leakage may impose significant environmental costs, for example because of the effect of abstracting too much water from rivers. In these areas, it may be appropriate for OFWAT to approve leakage targets below current estimates of the economic leakage level, because those estimates may not fully reflect the environmental costs (paragraph 34).

      (viii)  Leakage and leakage control have environmental impacts, for instance because over-abstraction of water can lead to rivers running dry. But there is uncertainty about how these impacts should be reflected in economic assessments, and as a result environmental costs and benefits are not fully reflected in leakage targets. OFWAT are participating in a tripartite study with the Environment Agency and the Department of the Environment, Transport and the Regions to seek to resolve these uncertainties. OFWAT should use the findings from this study to develop the arrangements for setting leakage targets so as to give environmental factors sufficient weight (paragraph 35).

Encouraging the Efficient Use of Water

      (ix)  Some greater efficiency in the use of water has already been obtained because customers who pay for their water, for example schools and hospitals, can obtain significant financial benefits by using less water. By reducing wastage in this way customers also help reduce the risk of supply restrictions in areas where water supplies are tight. There are welcome examples of good practice by water companies in providing advice to schools on saving water; but the quality of information provided to customers by different water companies varies. OFWAT should ensure that all companies achieve good practice in informing their customers about the efficient use of water, and take action where appropriate against companies which have not done enough to improve their efforts (paragraph 41).

      (x)  There are uncertainties about the effectiveness of the different types of action to help customers waste less water, such as fitting lavatory cistern devices or undertaking water audits. OFWAT should take an active role in identifying and spreading best practice in promoting water efficiency, and should consider moving towards targets for water efficiency that include the outcomes achieved by water companies, and not simply the amount they spend (paragraph 42).

QUALITY OF INFORMATION

6. It costs money to achieve and sustain reductions in leakage, and as the level of leakage falls, the unit cost of reducing leakage rises because leaks tend to be harder to find when they are rare. OFWAT have therefore adopted the concept of the economic level of leakage, which is the point at which the additional cost of saving water by further reducing leakage equals the cost of other ways of meeting the demand for water, such as new reservoirs.[1]

7. OFWAT told the Committee that it would not be efficient to look for nil leakage or anything like it. Instead they had adopted an approach that recognised the variations in the availability of water between different regions. For instance, the economic level of leakage for a company with plentiful water supplies, such as Northumbrian, was higher than for companies in the South East, where water scarcity was a real issue.[2] All water companies have accepted the concept of the economic level of leakage. They considered it to be in the company's own interest, the interest of its shareholders, as well as the interest of its customers, to achieve the economic level. This was especially true in water scarce areas such as the South East where companies had an interest in putting in sophisticated technologies to monitor where the leaks were, pinpoint where they were found, and to repair them quickly.[3]

8. For companies to be able estimate the economic level of leakage reliably they need robust information. There is, however, uncertainty about the total amount of leakage, because it is not measured directly. Leakage is instead calculated by subtracting the total amount of water used by customers from the total amount of water put into the system by water companies. Estimates of water consumption depend on estimating the amount of water used by the 80 per cent of water consumers who do not have a water meter. These estimates of unmetered consumption vary widely between companies, with a 31 per cent difference between the highest estimate and the lowest. There may be good reasons why such estimates should vary between companies, but the extent of the variation shows the scope that could exist for a company to manipulate their estimates to improve their reported leakage performance.[4]

9. We therefore asked what factors companies applied to estimate the average usage per head. OFWAT told us that the estimates included a mixture of household consumption and per capita consumption, and that companies were not preparing those estimates on a consistent basis. OFWAT were nevertheless encouraging companies to apply industry best practice for calculating average consumption per head.[5] When asked what factors were included in this best practice, OFWAT said that they included the geographical variation in company size, the pressure in the systems and the different types of household within the customer base. However, OFWAT doubted that water companies would include a measure of the number of children under five, say, as companies tended to stay at a higher level of aggregation.[6]

10. OFWAT set their leakage targets by company. By contrast, the company's water resource plans, prepared for the Environment Agency, focus on the different zones within each company's supply areas, reflecting the fact that water shortages in one of a company's zones can co-exist with surpluses in another.[7] The Committee asked whether there should be more stringent targets in those zones where there is more risk of water shortage. OFWAT replied that most companies were trying to focus on zones and, within these, on small groups of one to 2,000 properties called district metered areas. For the purpose of target-setting OFWAT might want to move towards more specific targets where companies were not yet making full use of such analysis, particularly in London.[8]

11. OFWAT require water companies to base their assessments of the economic level of leakage on the cost of replacing water that would otherwise be lost if leakage were not controlled. These assessments are based on the long run marginal cost of water, which is the additional cost of a unit increase in their output of water, taking account both of short term running costs and longer term costs such as capital investment. Assessment of this cost is also important in setting the price of water for metered customers and the cost-effectiveness of different actions to promote water efficiency. OFWAT have obtained each company's estimate of their long run marginal cost of supplying water. The estimates produced in April 1999 showed a very wide variation from company to company, from 11 to 135 pence per cubic metre.[9]

12. OFWAT advised that one reason for big variations in long-run marginal cost was the very large cost involved where a company had to undertake a large investment in increasing supply such as building a new reservoir. Any company that could save money through greater water efficiency and cutting leakage, particularly those companies in a water scarce area such as the South East, would have built in the costs of avoiding this investment into their long run marginal cost.[10] For example, Wessex Water had a high long run marginal cost because it was fairly close to its margins and would have to develop new sources if it experienced difficulty in matching supply to demand. Other companies, in contrast, had all the water they needed for the foreseeable future.[11]

13. OFWAT told us that some companies might not be following good practice in estimating long run marginal cost, so we asked what OFWAT were doing to specify how the calculation should be done. OFWAT said they looked to companies to present their long run marginal cost estimates in a way which would show whether they were using robust approaches, for instance by separating out treatment, bulk transport and local distribution costs. By looking at them, testing them, asking questions and comparing them with their peers in the water industry, OFWAT were able to judge their robustness.[12]

Conclusions

14. OFWAT consider that an acceptable level of leakage is the point at which the cost of reducing leakage equals the cost of providing water from other sources (the economic level of leakage). Figures for the amount of leakage are, however, imprecise because the total amount of leakage is not measured directly, for example by household water meters. Instead, OFWAT rely on assumptions about water consumption in the 80 per cent of households that do not have water meters, and these assumptions vary considerably across the country. Uncertain information about domestic consumption means that company estimates of leakage could be subject to manipulation and the impact of water efficiency actions cannot be reliably measured. These uncertainties call into question the reliability of OFWAT's analysis of the economic level of leakage.

15. The variations in estimates of unmeasured consumption, and hence leakage, are in part a result of different characteristics of households across the country. But they may also be a result of differing approaches taken by companies to estimating domestic consumption. Factors such as the number and ages of children in households and how many people are employed are likely to have a significant bearing on water consumption, but the way companies estimate domestic consumption involves a high degree of aggregation and therefore may not reflect such factors. We recommend that OFWAT review their guidance to companies to ensure that companies compile their estimates of leakage with greater consistency.

16. The Environment Agency have a zonal approach to monitoring water resources, which recognises that, even for a company with an adequate demand-supply balance overall, some zones will have tight water supply conditions. Conditions can vary considerably between the zones served by some companies, such as Thames Water. OFWAT told us that they were considering whether to set leakage targets for zones rather than for companies as a whole, where appropriate. We can see considerable advantages in OFWAT moving in this direction so as to focus on those zones with little margin between water demand and supply.

17. There is a wide variation in company estimates of the long run marginal cost of water, including both the short and long term costs of an increase in the supply of water. The variation from company to company may reflect differences in the balance of water demand and supply, in particular over the amount by which projected demand has to rise before a company would need to develop expensive new sources of water such as reservoirs. It may also be a result, however, of inconsistent methodologies. We recommend that OFWAT should require companies to use consistent and robust methodologies.

SECURING REDUCTIONS IN LEAKAGE

Performance in reducing leakage

18. Following privatisation in 1989, leakage across the water industry rose, so that by 1995 the volume of water that was being lost nationally through leakage was 5.1 million cubic litres per day. This was nearly three times the amount used per day by the customers of the biggest water company, Thames Water. Leakage represented some 30 per cent of the total water put into their distribution systems by the water companies.[13]

19. OFWAT told us that, over this period, leakage had not had as high a priority as it should have done. The technology for monitoring and finding leaks had been very limited and for three to four years the industry and the regulator had not been focussing on this issue as they clearly should have been. The drought had, in effect, provided a wake-up call to the industry and the regulator.[14] OFWAT told us that one of the lessons which everybody in the water industry had learnt in the mid-1990s was not to be complacent, especially given the risk that there might be more extreme changes as a result of global warming, with perhaps more sudden floods interspersed with long dry spells.[15]

20. Following the 1995 drought, OFWAT reviewed company performance on controlling leakage, and concluded that they should set companies leakage reduction targets. Their use of targets increased following the 1997 Water Summit, when the Government announced that OFWAT would set tough mandatory targets for leakage over the following five years. OFWAT set mandatory leakage targets for all water companies in 1998-99, 1999-2000, and 2000-01, and for eight of the 24 companies in 2001-02. They have not set targets for the remaining companies because these companies have produced robust analyses of their economic levels of leakage, and in these cases OFWAT monitor progress against those companies' own targets. Since 1995 leakage has reduced significantly. By 1999-2000 estimated leakage stood at 3.3 million cubic metres a day, or 21 per cent of total water put into supply. This represented a reduction of 1.2 million cubic metres a day, or more than a quarter, since the Water Summit in May 1997.[16]

21. OFWAT told us that progress has been made from an unsatisfactory position before and just after the drought in the mid 1990s, although the work done initially made the biggest gains because that was when there had been most to make up.[17] Some companies considered that OFWAT's targets had resulted in greater reductions than needed to achieve the economic level of leakage. If the companies' analysis was good enough, however, OFWAT would accept the companies' targets because they could prove what the real level of economic leakage was in their area. Where OFWAT had not accepted a company's analysis of its economic level of leakage they had imposed their own targets.[18]

22. In OFWAT's view, only 6 out of 24 companies had as yet reached their estimated economic level of leakage, and those companies needed to work hard to maintain that position. OFWAT were looking to the other companies to reach their economic level by 2002-03. They had thought it right that companies should be given until then because the sort of work that these companies needed to do took a some time. For instance, companies would need to put in place district metered areas, covering an area of one to 2000 properties, as a means of identifying leakage. Further technology would be needed to pinpoint leaks, and the means of solving each leakage problem would need to be identified. OFWAT added that English and Welsh companies compared well with the international picture on leakage performance.[19]

Acceptable levels of leakage

23. OFWAT told us that they expected leakage to have reduced to 3 million cubic litres a day by 2002 which was still a considerable loss of water. But it flowed down 300,000 kilometres of pipes, many of which were in the ownership of individual householders and other customers, and they could not do much better than the 2002 figure without imposing costs. They therefore believed that just under 20 per cent of water into supply would be an acceptable level of leakage. The technology was improving all the time, however, so the economic level of leakage could be expected to fall.[20]

24. We asked whether, if water leakages were maintained at the 20 per cent level, customers would be at risk of losing their supplies and having hose pipe bans. OFWAT told us that domestic customers should be able to turn on the tap and get safe water at an acceptable quality at the right pressure. Hose pipe bans should not need to be imposed more than once every ten years and there had not had one since 1998. Customers would not be at risk of hose pipe bans for at least the next two years. Although OFWAT could not be absolutely confident about the future position on security of supply, they would be in a more confident position than they would have been in the mid-1990s in the event of a drought going through two summers and a dry winter.[21]

25. OFWAT told us that they were particularly focussing attention on those companies that stood out as both being at risk on security of supply and as yet in an unsatisfactory position on their leakage, especially where the companies had not made a robust appraisal of their economic level of leakage (Figure 1). Thames Water, for instance, had not done enough to tackle leakage, nor to produce a robust appraisal of its appropriate economic level of leakage. OFWAT's figures show that in 1999-2000 Thames Water's leakage relative to the length of its pipes was 60 per cent higher than the next highest company, and was higher than all but one other company in terms of leakage per property.[22]

Figure 1: OFWAT's assessment of levels of leakage compared to water resource positions
Water resource/ supply position
High levels of leakage
Medium levels of leakage
Low levels of leakage
Tight
Thames
Wessex
South East
Essex & Suffolk
Folkestone & Dover
Marginal
Dwr Cymru (Welsh Water)
South Staffs
North West
Yorkshire
Three Valleys
Anglian
Severn Trent
South West
Southern
Bristol
Bournemouth & W. Hampshire
Cambridge
Dee Valley
Mid Kent
North Surrey
Sutton & East Surrey
Tendring Hundred
Adequate
  
Northumbrian
Portsmouth

Source: OFWAT - Leakage and efficient use of water report, 1999-2000

Note: Companies in italics were considered by OFWAT to have robust economic appraisals of leakage

26. OFWAT told us that they had required Thames Water to provide quarterly reports on progress. There was no risk to customers at present in the area served by Thames Water, and the company had not even imposed a hose pipe ban for ten years or so. But the area was difficult to manage and progress had been slow in getting technology in place to deal with leakage.[23] Central London presented particular difficulties in reducing leakage, because it was important that the water company minimised disruption when digging up the road to deal with a leak, and the company also had to move parked cars when roads were dug up. The company's record on leakage should not be considered in isolation, however, as it was a company internationally recognised as being good at its job more generally.[24]

The sale of Welsh Water

27. On 3 November 2000, the board of Glas Cymru announced that it had agreed terms with Western Power Distribution (WPD) for the acquisition of Dwr Cymru (Welsh Water). Glas Cymru is a company limited by guarantee, owned by its members. After consultation, OFWAT announced on 31 January 2001 that, subject to certain licence conditions, OFWAT would not object to the proposals.[25] We asked whether the change in the form of ownership of Dwr Cymru in any way complicated or facilitated OFWAT's work. They said that on balance they thought it right that the purchase should go forward subject to stringent conditions. It was a model that would enable them, although not easily, to maintain their system of comparative information, which was central to the way they regulated the water industry.[26]

28. OFWAT did not believe, however, that their decision in this case should be regarded as a precedent for the industry as a whole. They had rejected an earlier restructuring proposal, put forward by Kelda plc for Yorkshire Water in June 2000, because of their concerns over incentives for efficiency, the risks borne by customers, the accountability of the new structure, a lack of competitive tendering, and the hostility to the proposals from Yorkshire Water's customers. OFWAT had supported the Glas Cymru proposal because of some special features of the case, including the support of the National Assembly for Wales for the proposal and the clear independence of the purchaser (Glas Cymru) from the seller.[27]

Conclusions

29. Although 18 of 24 companies have not yet reached their economic level of leakage, OFWAT expect all water companies to reach their economic level by 2002-03. Even if water companies achieve this further marginal improvement, leakage will still represent 19-20 per cent of all water put into supply. OFWAT believe that technology may reduce the economic level of leakage in the future. OFWAT should continue to monitor the position carefully, adjust companies' leakage targets accordingly, and press them to meet these targets.

30. Some of the water companies which are well above their level of economic leakage also have little margin between the demand for and supply of water. In these areas it is important that companies continue to make concerted efforts to limit leakage as far as possible. OFWAT should ensure that these companies reduce leakage to the economic level, and should apply sanctions to any companies that are not acting vigorously enough to improve their leakage performance.

THE ENVIRONMENTAL IMPACT OF LEAKAGE

31. Reducing leakage can reduce the amount of water that companies need to take from water sources. In some places, water abstraction has caused significant environmental damage - by reducing the flow of rivers or by damaging natural habitats like wetlands, or by deferring the need to construct new reservoirs. Reducing leakage can therefore have significant environmental benefits. There are however uncertainties as to how the costs and benefits to the environment of leakage control should be included in the economic level of leakage. OFWAT, the Department of the Environment, Transport and the Regions, and the Environment Agency have established a tripartite study to establish the key principles to be followed in calculating the economic level of leakage.[28]

32. OFWAT told us that existing analysis of levels of leakage focussed very heavily on economic factors and the tripartite study would consider the social costs, environmental benefits and dis-benefits associated with leakage. The study was due to report in the Summer of 2001. The way in which figures were to be put in place was part of a long running debate between the Environment Agency and OFWAT. It was important that costs and benefits could be seen and weighed properly, rather than just saying environmental good was an absolute and must never be tested. OFWAT added, however, that the work undertaken so far did not suggest that greater sophistication in measuring environmental and social costs would make a huge difference to the picture.[29]

33. When asked whether any new reservoirs were in contemplation, OFWAT told us that there was the possibility of raising existing reservoirs, which Severn Trent had recently done. That in itself took 10 to 15 years from inception to completion, with a huge amount of effort in ensuring all the environmental principles were properly analysed and the least environmentally damaging option was followed through. New reservoirs were not to be expected within the next decade because of the huge lead-time that would be involved. Some companies were looking 10 to 20 years ahead for their long term supply needs and at that point they might start thinking about new reservoirs. The companies' short term priority was controlling leakage and developing appropriate, least environmentally damaging sources so as to minimise the need for the big step changes in investment represented by reservoirs.[30]

Conclusions

34. In some areas with tight water resources, leakage may impose significant environmental costs, for example because of the effect of abstracting too much water from rivers. In these areas, it may be appropriate for OFWAT to approve leakage targets below current estimates of the economic leakage level, because those estimates may not fully reflect the environmental costs.

35. Leakage and leakage control have environmental impacts, for instance because over-abstraction of water can lead to rivers running dry. But there is uncertainty about how these impacts should be reflected in economic assessments, and as a result environmental costs and benefits are not fully reflected in leakage targets. OFWAT are participating in a tripartite study with the Environment Agency and the Department of the Environment, Transport and the Regions to seek to resolve these uncertainties. OFWAT should use the findings from this study to develop the arrangements for setting leakage targets so as to give environmental factors sufficient weight.

ENCOURAGING THE EFFICIENT USE OF WATER

36. Water companies have a statutory duty under the Environment Act 1995 to promote the efficient use of water by their customers. OFWAT are responsible for ensuring that water companies meet that duty and have the power to require a company to take action, or to achieve overall standards of performance in carrying out this duty.[31]

37. Using water efficiently can have a significant impact on the bills for customers who pay for the water they use, such as business and institutions like schools and hospitals. OFWAT said that the potential for competition in water supply was making water companies go to big users and provide studies on how they can get their water bills down. OFWAT acknowledged that the water bill for a company tended to be a relatively low proportion of overall costs, but they hoped to create an environment in which it would be in the water company's interest and the interest of the non-domestic user to focus their attention on the water bill and how to make it lower.[32]

38. OFWAT have identified several examples of research into water efficiency in schools, some of which generated significant savings of between 40 and 70% of water bills for the schools concerned. In one example in the area supplied by North West Water, a water audit which cost only £2,787 resulted in a reduction of the school's annual water bill of £1,644.[33] OFWAT told us that it was worthwhile for water companies to work with schools to promote water efficiency, but only if the drive was maintained once the initial focus had gone and if the lessons learnt in one school were passed on to others. Institutions such as local education authorities and hospital trusts had significant scope for reducing water use and should be investing in reducing their water bills. OFWAT referred to examples in their report on Leakage and the efficient use of water 1999-2000 of how water companies were helping to promote the efficient use of water including educational work. These examples were included in the Report partly to encourage other companies to follow suit.[34]

39. OFWAT said that they assessed the performance of water companies in maintaining a long term programme of education to sustain customer awareness of the need for sensible water use. We asked what OFWAT were doing to ensure that all water companies attained the same standards as those they classify as achieving good performance. OFWAT told us that there were some companies that clearly needed to improve, and that they were in dialogue with those companies to that end. They looked at company plans for water efficiency action in terms of the numbers of actions being taken and the appropriateness of the action to the company's particular area.[35]

40. Information on the cost effectiveness of water efficiency action is incomplete. Per capita consumption has increased in recent years: since 1992-93 by an estimated 8 per cent for unmetered domestic customers and since 1994-95 by 6 per cent for metered domestic customers. This increase has coincided with an increase in the number of households, a reduction in the average size of households, and an increase in the use of water-intensive domestic appliances. All other things being equal, some increase in consumption might therefore have been expected, and it is possible that water efficiency actions might have slowed the growth in consumption. These data provided little evidence, however, that water efficiency actions have yet had any pronounced effect on consumption.[36] OFWAT told us that where a company focussed attention for a year or so on a particular set of customers, the customers would respond and save lots of water, but it was unclear whether the saving would be maintained into the future. Probably the biggest scope for savings was in use of lavatory cistern devices which could reduce the litres of water used per flush from a norm of between seven and nine litres to six litres. OFWAT told us that they hoped to learn more about the effectiveness of different types of water efficiency action from joint research funded by Water UK, the body representing all water companies.[37]

Conclusions

41. Some greater efficiency in the use of water has already been obtained because customers who pay for their water, for example schools and hospitals, can obtain significant financial benefits by using less water. By reducing wastage in this way customers also help reduce the risk of supply restrictions in areas where water supplies are tight. There are welcome examples of good practice by water companies in providing advice to schools on saving water; but the quality of information provided to customers by different water companies varies. OFWAT should ensure that all companies achieve good practice in informing their customers about the efficient use of water, and take action where appropriate against companies which have not done enough to improve their efforts.

42. There are uncertainties about the effectiveness of the different types of action to help customers waste less water, such as fitting lavatory cistern devices or undertaking water audits. OFWAT should take an active role in identifying and spreading best practice in promoting water efficiency, and should consider moving towards targets for water efficiency that include the outcomes achieved by water companies, and not simply the amount they spend.


1  C&AG's Report, Leakage and Water Efficiency, (HC 971), paras 2.4, 2.49 Back

2  Qs 3, 53-54 Back

3  Qs 93, 50, 113 Back

4  C&AG's Report, Figure 6, para 2.17 Back

5  Qs 62, 64, 68 Back

6  Qs 69-72 Back

7  C&AG's report, para 2.32 Back

8  Q22 Back

9  C&AG's Report, paras 2.63-2.64 Back

10  Q78 Back

11  Qs 97-98 Back

12  Qs 78, 97 Back

13  C&AG's Report, para 2.6 Back

14  Qs 16, 83 Back

15  Q116 Back

16  C&AG's Report, paras 2.10-2.13  Back

17  Q3 Back

18  Q93 Back

19  Qs 13, 107 Back

20  Qs 3-6, 18 Back

21  Qs 26-28, 33, 40 Back

22  Leakage and the Efficient Use of Water 1999-2000 report - OFWAT, Figure 2 on pp 12-13 (not printed); and Qs 8-9 Back

23  Qs 10, 57, 111 Back

24  Qs 30, 56 Back

25  Evidence, Appendix 1, p19 Back

26  Qs 134-135 Back

27  Evidence, Appendix 1, p19 Back

28  C&AG's Report, para 2.34-2.35, 2.67 Back

29  Qs 21, 81 Back

30  Q132 Back

31  C&AG's Report, para 3.3 Back

32  Q102 Back

33  Evidence, Appendix 1, p18; and C&AG's Report, para 3.20 Back

34  Leakage and the Efficient Use of Water 1999-2000 report (not printed) - OFWAT; Qs 124-129 Back

35  Qs 24, 105 Back

36  C&AG's Report, paras 3.26-3.28 Back

37  Qs 77, 82, 129 Back


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 4 January 2002