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Water Reform Unit Department for Regional Development Response to: Water Reform Unit Department for Regional Development on CONSULTATION ON PROPOSAL FOR A DRAFT WATER AND SEWERAGE SERVICES (NORTHERN IRELAND) ORDER 2006 by The Consumer Council August 2006 Contents Page Introduction 2 - 4 Section 1: Opening Comments 5 - 6 Section 2: Key Policy Issues 6 - 12 Section 3: Key Legislative Issues 12 - 21 Section 4: Key Changes to be Made to the Draft Legislation 22 - 26 Section 5: Additional Comments on the Draft Legislation 27 - 34 Section 6: Drafting Points 35 - 41 Annex 1: Supporting Information on Leakage 42 - 48 1 INTRODUCTION 1. The Consumer Council is pleased to participate in the consultation exercise on the Proposal for a Draft Water and Sewerage Services (Northern Ireland) Order 2006 launched on 1 June 2006 by David Cairns MP, the Minister with responsibility for Water Reform. 2. The Consumer Council’s legislative role is to give consumers a voice - and to make sure that voice is heard by those who make decisions that affect consumers. A Non-Departmental Public Body, the Consumer Council was set up by statute in 1985 to promote and safeguard the interests of all consumers in Northern Ireland. 3. The Consumer Council has certain specific legislative responsibilities for energy (including natural gas, electricity and coal), passenger transport and food, and it has been designated as the consumer representative body for water services from 2007. 4. A key feature of the Consumer Council’s work is the need to carry out research to determine consumer concerns and to campaign for the best possible standards of service and protection. The Consumer Council also has a major role to play in educating consumers so that they will have the skills and confidence to meet future challenges. The Consumer Council’s position 5. The Consumer Council has been consistent in supporting the principle of paying for water and sewerage services. We acknowledge that high quality public services such as health and education and improved infrastructure for water, sewerage and public transport all come at a cost and there is a need to agree on the best way of funding them now and in the future. 2 The Consumer Council’s involvement in Water Reform 6. The Consumer Council has been heavily involved in the issue of Water Reform, which we consider to be one of the most significant consumer issues of recent years. In 2002 we undertook independent consumer research into consumers’ views and concerns of the water and sewerage service. We published this research in an information paper Paying for Water in 2003. The purpose of this paper was to put information out into the public domain and inform and influence a debate that we believed lacked information and transparency. We also used this research to inform our response to the 2003 Water Reform consultation. We repeated our research in 2004 and used this research to inform our 2004 analysis paper on alternative proposals for Water Reform called Water – A Clear Way Forward. In 2005 we submitted a substantive response to the Integrated Impact Assessment on Water Reform. 7. We were instrumental in bringing together a consortium of social partners, like-minded organisations who shared our fundamental policy positions, and this forum was a key driver in calling for a one-year delay to the introduction of the new, direct water and sewerage charge. The forum also secured significant change in protection for vulnerable consumers and the ultimate design and adoption of the affordability tariff. 8. We continue to inform and influence the debate and deliver information to the public in an easy to understand way. The Consumer Council’s response 9. This response to the consultation will consist of four separate sections: (1) Opening Comments; (2) Key Policy Issues; (3) Key Legislative Issues; (4) Key Changes to be Made to the Draft Legislation; (5) Additional Comments on the Draft Legislation; and (6) Drafting Points. The first section will contain the principles underlying the Consumer Council’s approach as well as general comments of the Consumer 3 Council on the reform of water and sewerage services. Although these will have already been relayed to DRD at earlier stages in the consultation process, the Consumer Council nevertheless feels that they should be highlighted again as being matters that should be kept to the forefront during the ongoing implementation of the water and sewerage reforms. In particular, this applies to the development of the charges scheme and the Regulations dealing with the affordability tariff. The second section relates to key changes to the legislation that the Consumer Council considers to be fundamental. Our comments fall particularly into the following categories: Powers and duties of the Consumer Council including billing complaints; powers and the duties of the Northern Ireland Authority for Utility Regulation (NIAUR/the Authority) including charges and a general authorisation to fulfil its duties; Affordability Tariff; Consultation with the Consumer Council and disclosure of information including water resource and efficiency plans; and the abolition of the Northern Ireland Water Council. The third section considers additional comments in relation to individual Articles of the draft Order. Finally, the fourth section contains a number of drafting points noted during our examination of the draft Order. Annex 1 contains information to support our response. 4 SECTION 1: OPENING COMMENTS Underlying Principles to Inform Water Reform Policy Approach 10. In providing its response to this consultation the Consumer Council considers it important to set out the principles that underpin the remainder of this submission. We would wish to be assured that these are key drivers to the Water Reform agenda both now and as we go forward. In summary these include: The Consumer Council has been consistent in supporting the principle of paying a fair price for water and sewerage services. Stemming from this, we believe that two objectives emerge: a. Consumer responsiveness and protection; and b. Sustainable, stable water and sewerage services. Legislation, licence, charging etc. must be based on best model for Northern Ireland learning from England, Wales and internationally while fully reflecting the particular circumstances of Northern Ireland, rather than a prescriptive England and Wales-based approach. Fair, affordable and sustainable charges alongside openness, transparency and accountability to consumers. Common and consistent Northern Ireland multi-utility approach: powers and duties in water of same order as with electricity and gas e.g. enforcement responsibilities of the Authority, complaint-handling of consumer representative body, disclosure and sharing of information. Role of legislative consumer representative body and Authority valued and fully reflected in legislation and licence. Clarity to consumers on each organisation’s roles supported by flexible and comprehensive legislative framework, licence and governance 5 arrangements. Consumer representative body consulted on all matters with implications or impacts on consumers. Good policy decisions and robust legislation are best built on a fully informed debate, which promotes timely and meaningful engagement and general agreement on the best way forward. SECTION 2: KEY POLICY ISSUES The right to water 11. The Consumer Council has long argued that the right to an adequate supply of safe, wholesome water is a basic human right. Water is a fundamental requirement of public health and hygiene. Similarly, a modern, safe and effective sewerage system is essential for the protection of both people and the environment both now and in the future. Economic Level of Leakage 12. In January 2004 the Northern Ireland Water Service’s Water Efficiency Plan stated that NI Water Service’s economic level of leakage (ELL) was 24.2 per cent1 (172 million litres of leakage from the 710 million litres produced by NI Water Service every day). The ELL is defined as the level where the cost of reductions exceeds the benefits of those reductions (ie) it would cost more to make further reductions than to produce the water from another source. 13. NI Water Service’s ELL is still above levels in other parts of the UK and elsewhere in Europe. In fact, Northern Ireland’s leakage rate is comparable to developing Eastern European countries while Germany and Tokyo are operating on leakage levels of three per cent and four per 1 Minister Spellar’s Speaking Notes for the Launch of the Water Efficiency Plan on Monday 12 January 2004 6 cent respectively. Northern Ireland’s ELL must be reviewed to encourage greater efficiency, less wastage and reduced costs. 14. As can be appreciated from Table 1, the ELL that has been recommended for NI Water Service is less challenging, on a per head of population basis, than the one set for Thames Water – 165 Ml/day and 770 Ml/day respectively, despite £37 million of taxpayers’ money being invested in leakage reduction measures over the past six years, while a further £13 million will be invested over the next two years2. Ultimately, £2 billion is to be invested in the upgrading of Northern Ireland's water and sewerage infrastructure over the next decade. Table 1: Water & Sewerage Companies’ Leakage Targets 07/08 (Ml/day)3 Water and Sewerage Company Ml/day l/day/person Population Thames 770 96.3 8.0 Severn Trent 505 68.2 7.4 United Utilities 465 160.3 2.9 Yorkshire 295 173.5 1.7 Welsh Water 205 170.8 1.2 Anglian 210 80.8 2.6 NI Water Service 1654 97.1 1.7 Northumbrian North 155 59.6 2.6 Southern 92 46.0 2.0 South West 84 52.5 1.6 Wessex 74 61.7 1.2 Northumbrian South 68 Scottish Water 855 388.6 2.2 15. Several commentators have called for the ELL to be revisited. Southern water has stated that, as pressure on resources grows, it may be necessary to revisit current calculations on what represents an ELL to include more of an environmental impact rather than focusing solely on economics.
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