Jacob Tompkins 'Soapbox' in Utility Week

20 July 2011

20 July 2011 - Government must fill water policy vacuum

Decisive action needs to be taken to deal with unsustainable demands on our water resources and infrastructure.

Until relatively recently, the focus was on increasing water supply, but over the past two decades, water companies have tackled leakage and are now turning their attention to metering and customer demand. This is a difficult area for water utilities; in general they are good at large infrastructure projects and at the maintenance and repair of networks.

But managing customer demand requires a new set of skills. It requires the use of distributed assets where liability and ownership are uncertain, and a knowledge of customer behaviour. It also requires customer-facing staff who can retrofit devices and engage customers. Although water companies are currently struggling to meet these challenges, there has been an appreciable increase in activity on efficiency.

Water companies have undertaken joint communications on water efficiency, contributed to a more robust evidence base for water savings, carried out large-scale home retrofit programmes and worked with businesses and schools in large numbers.

At the same time, there has been a shift in the regulatory framework. The use of tools such as the revenue correction mechanism has started to address financial disincentives to water efficiency, and water efficiency targets have made water efficiency activities more result oriented.

Despite these developments, there is still a need for water efficiency to be recognised as a key element of a water company's role. At the moment it is not, partly because the impact of water efficiency activity is small compared with supply-side measures.

However, as the trend towards providing "water services" rather than just water intensifies, water efficiency will be given a greater role.

In addition, there is a gap between utility infrastructure and IT infrastructure, and water companies in particular need to harness IT to facilitate interaction with customers and understand their consumption patterns.

There is some movement here, with a number of companies rolling out metering or water retrofit programmes, but there is little incentive for these types of innovation.

As regional utilities with a stable customer base, water companies are ideally positioned to help people save water and energy in the home - and there is money to be made out of domestic efficiency. But the industry seems slow to embrace smart metering or initiatives such as the Green Deal. This may be due to the lack of guidance from government on things such as metering, or the lack of incentive within the regulatory framework. But there is clearly a business opportunity here for a first mover in the water sector.

In my view, there is a need for government to give a clear steer on what the water industry is for, and what the long-term vision is. We have had several Water Acts and a huge number of reviews, but it is still acceptable to berate water companies for not protecting the environment, or not delivering shareholder return, or not promoting water efficiency, or not securing supply. While the industry is reliable - and excellent at delivering once it is given a clear target - it is very difficult for it to meet all these general aims. Clear vision from government would enable water companies to focus and deliver.

A perfect example of where vision is lacking is on metering. The government could save water customers up to £1.5 billion in installation costs alone by setting out plans for a national metering switchover. Instead, the decision about what should be a national policy is being left to water companies who will then be left to shoulder the blame if it goes wrong. Until the policy vacuum is filled, we will continue with a scattered approach to metering and piecemeal water efficiency measures.

Jacob Tompkins, managing director, Waterwise

Source: Utility Week

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