Water firms’ progress on leakage and pollution ‘stagnating’, says regulator

The water industry “has not kept up on the progress made in earlier years” on leakage and pollution, according to Ofwat.

Covering 2018/19, the regulator’s annual service delivery report singles out Anglian Water, Wessex Water and Portsmouth Water for praise, noting how they have met or exceeded water quality, sewer flooding and leakage commitments made in 2014.

“But it also shows some inertia at the bottom of the pack with Thames Water and Hafren Dyfrdwy underperforming across a wide range of measures,” said Ofwat’s chief executive Rachel Fletcher.

Thames is in a league of its own, coming at the bottom end of performance for expenditure, customer service, earning financial incentives, leakage, supply interruptions and meeting performance commitments. Of ten categories of efficiency and effectiveness, six deteriorated on the previous year.

Northumbrian Water, Dwr Cymru, South East Water and Sutton and East Surrey Water’s performance also deteriorated in 2018/19 compared to comparison to 2017/18.

Despite the wide gap in performance, the overall picture is one of stagnation. Eight companies made “modest” reductions in leakage, though their progress is “more than offset” by a rise in water pouring out from the pipes of other firms, according to the regulator. “Little progress” has been made on reducing leakage since 2012/13, it added.

“It’s great that we are seeing some real improvements on things that matter – like reducing sewer flooding. But in other areas the industry’s performance is stagnating,” Fletcher said. 

“Ofwat’s new strategy and the challenges we are setting in the price review for the five year period to 2025, require companies to transform their performance, particularly those at the bottom of the pile. We are raising what we expect from companies and in responding to that, they will need to show innovation and real ambition,” she added.

The sector also spent 6% more than it was supposed to in 2018/19, although there is a cumulative underspend of 2% since 2015, when the current price control and performance objectives kicked in.

There is some sign of improvement in meeting supply interruption targets, although that appears to be linked more to the cold winter of 2017/18 breaking pipes through ice formation. Half of the firms achieved their targets.

Just over half of supply interruptions targets were achieved in 2018-19, despite more companies achieving their targets in 2018- 19 in comparison to 2017-18. Performance in 2017-18 was adversely impacted by the freezethaw event. Since 2012-13 the sector has reduced the total supply interruption minutes experienced by customers by 24%, or five minutes per property.

In 2017/18, Severn Trent made £86m from going far above its objectives for sewer flooding. Despite Ofwat raising them further, they were outperformed again in 2018/19. However, as it failed to meet objectives for internal sewer flooding, supply interruptions and pollution incidents, it ended up paying £3.3m to Ofwat overall.

The sector as a whole incurred £108m in underperformance penalties, while achieving £85m in outperformance payments. The net £23m penalty was the first in the PR14 period, largely related to Thames Water’s £120m package for not meeting leakage commitments for the second year running. The firm leaked 690 million litres of water per day, against a target of 612Ml/d. Affinity water also failed its leakage target again.

The sum was a record until this summer’s £126m bill for Southern Water’s manipulation of wastewater treatment plant data, confirmed earlier in October.

Yorkshire Water, Southern Water, South West Water and Severn Trent all failed to meet expectations for pollution incidents. The worst was South West Water, seeing 98 category 1-3 incidents per 10,000km of sewer. Northumbrian Water had only 12, under the same measure.

Despite numbers falling substantially since 2012/13, when there were almost 3,000 individual pollution incidents, the industry “did not quite achieve” the goal of reducing them by a third and “there has been no material overall improvement since 2015”, the report stated. “The Environment Agency advises that significant improvements are required,” it added.

While Northumbrian Water, Southern Water and Anglian Water have reduced pollution incidents by 81%, 63% and 57% respectively, Wessex Water caused 38% more pollution incidents in 2018 than 2012.

In July, the Environment Agency chair Emma Howard Boyd described the industry’s pollution performance as “simply unacceptable”. Former environment secretary Michael Gove responded by calling a meeting of regulators and chief executives, instructing the sector to “drop the excuse- mongering”. Ofwat confirmed the goals for the PR19 period the same day.

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