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. Similarly, the London Assembly has called on water companies to reduce leakage beyond the economic level5.
2 Water Service (2006) Water News July 2006 p.2 3 OFWAT (2005) Security of Supply, Leakage and the Efficient Use of Water: 2004-2005 Report p.36 4 Water Service (2006) Personal Communication with Mr Brian McCalmont 13.06.06. 5 London Assembly Health and Public Services Committee (2006) Drought in London July 2006, p.4
7 16. The Consumer Council is concerned that customers are picking up the cost of all leaks – not just those leaks from the boundary to their properties. There is no risk accrued to NI Water Service. Meanwhile, the onus continues to be on the consumer to save and conserve water while all the benefits accrue to the NI Water Service since a charging regime based on capital value provides no incentive to reduce their water leakage.
17. The Consumer Council wishes the target to be revisited with the GoCo set a challenging but achievable ELL, with the emphasis on challenging. There must also be a compulsion on NI Water Service to achieve and maintain that target.
18. For further detailed information on leakage please refer to Annex 1.
Promoting Water Efficiency
19. More needs to be done to promote water efficiency in Northern Ireland and to change the attitude amongst consumers that the supply and quality of our water supply is guaranteed. Introducing a direct water and sewerage charge based on the capital value of the consumer’s property rather than usage coupled with NI Water Service’s high leakage level of 26 per cent represent barriers to water efficiency. The Chief Executive of the NI Water Service, Katharine Bryan, is on record as stating, “If you [consumers] don’t save water, prices will go up”. In the circumstances, the Consumer Council views this as a perverse consumer incentive. In the words of an American Water spokesperson, "You can't expect the customer to concur [with water efficiency measures] if the water utility company has 25 per cent leakage!"6 The Consumer Council is concerned that the NI Water Service’s call for consumers to increase their efforts to save water flies in the face of disappointing leakage levels and targets. We believe that the consumer is the only player working
6 David Hughes Presentation to the Global Smart Metering Water Summit 29-30 June 2006
8 hard under the Water Reform agenda while the benefits accrue to NI Water Service.
20. The Consumer Council would wish to see more resources being devoted to promoting more efficient use of water. For example:
• The Consumer Council believes that the current metering policy represents an improvement to the Government’s embrace of sustainability issues but remains wide of the mark in fulfilling a truly fair, affordable and sustainable water and sewerage charging mechanism; • The Government must make a public statement of intent to move away from capital value and make a policy decision to introduce phased wholesale metering within a reasonable timeframe and with associated targets along the way to reflect this. Our preferred time scale would be within ten years; • The water undertaker must improve detection, repair and control to reduce leakage levels beyond the economic level of leakage; • A key initiative must be general consumer education and awareness raising. This could alert households to water wastage, for example the fact that between five and ten litres of water can be lost for every minute a tap is left running while brushing teeth; • Encouraging the use of more efficient toilets and more efficient use of grey water in planning guidance or building control regulations through incentives to make homes more water efficient; • Fitting water-efficient devices and appliances (for example low-water- use washing machines and dishwashers, timed garden sprinkler systems and low-flush toilets in households); • Targeted information in the form of household water audits; • Provision of tax incentives (e.g. reduced VAT) on water efficient products or through a water efficiency scheme similar to those available for energy conservation. This would help promote the more efficient use of water and could reduce bills for those on lowest incomes;
9 • An education programme to encourage recycling of grey water (water from the bathroom, including showers, baths and wash basins) can reduce water use by 30 per cent to 50 per cent if, for example, it is used when watering gardens or washing cars; • Capture rainwater for use (water butts); • Establishment of a water efficiency index for domestic appliances in much the same way as for energy efficiency for appliances; and • Waste water re-use and water usage restrictions.
21. The Consumer Council strongly recommends the development of a strategy to promote water efficiency and that a widespread domestic metering policy be rolled out as soon as practicable. This is because we believe that many consumers will only work hard to conserve water if their actions are supported by a metered regime where consumption can be managed and their efforts will be rewarded via lower bills.
Other policy issues for consideration
22. Strategic Business Plan: The Consumer Council would seek independent quality assurance of the NI Water Service Business Plan, which is to be published soon.
23. Sustainable development - A balance needs to be struck between cost, efficiency and environmental sustainability. Where economic, social and environmental factors conflict, the Government must decide which has primacy.
24. Cross-Subsidy - Consumers should not be penalised for those customers who refuse to pay. This is an implied form of cross-subsidy in a self-financing system since non-payers of bills are effectively cross subsidised by all those who do pay their bills, including those who have difficulty paying bills.
10 25. Pegging: The Consumer Council would wish to see the Northern Ireland charge pegged to the English and Welsh average only as a minimum guarantee in the event that this represents a better deal than a truly cost- reflective charge. This is in order that the customer does not bear all the risk of an increased charge.
26. Guaranteed Service Standards (GSS): The Consumer Council considers that it would be unacceptable if consumers ultimately funded GSS payments since these represent a company’s failure to meet its stated standards. We believe that this is neither logical nor fair. The issue remains to be clarified. Fundamentally, the Consumer Council believes that GSS funding must be directly linked to the profits/bonuses of the organisation/staff if standards are to be improved and maintained.
Learning from best practice
27. The Consumer Council strongly believes that the whole reform of water and sewerage services - and in particular the development of the charges scheme and the Regulations dealing with the affordability tariff - should be based on a model appropriate to the specific needs of Northern Ireland. We believe that the principle of adopting and adapting English and Welsh legislation and reforms is a flawed approach. The opportunity should be taken to learn from experience in England and Wales (as well as other international exemplars) rather than simply reproducing measures that have been put in place elsewhere. The twin aims should be to ensure the protection of consumer interests in this vital utility area whilst providing the circumstances for a sustainable and stable water and sewerage service. It is vital that there is consistency of approach and parity of application where appropriate in the fields of energy and water regulation. This can only be achieved by building on the most appropriate legislative provisions that have been put in place since the passage of the original GB Water Act. Specifically, the Utilities Act 2000 – relevant powers of which in Northern Ireland became the Energy Order 2003 – builds on earlier legislation to
11 provide clarity and authority for regulatory and departmental responsibilities and powers.
28. The Consumer Council recommends that DRD make a commitment to develop a model that learns and draws from best practice in Northern Ireland and elsewhere and from other relevant utility legislation rather than one that simply reproduces England and Wales Water Act provisions.
SECTION 3: KEY LEGISLATIVE ISSUES
29. This section contains general comments on issues relating to the draft Order. Our detailed comments on the Articles are contained in Section 4: Key Changes to be Made to the Draft Legislation.
The Authority
30. Reference is made in the next section of this response to a number of instances where the Authority’s enforcement powers can only be exercised subject to the consent of DRD or under a general authorisation given to the Authority by DRD. The Consumer Council has concerns about the Authority being directed by DRD (and in some cases DOE). In these instances the Consumer Council recommends that DRD undertakes to give a general authorisation to the Authority to enforce the relevant provisions from the date the draft Order comes into operation. This is particularly desirable given the special situation in Northern Ireland where, for the foreseeable future, GoCo will be the sole water and sewerage undertaker and DRD will be the sole shareholder in GoCo.
31. The specific Articles referred to in the second section of this response are not the only cases under the draft Order where the power of the Authority to carry out its enforcement and other functions either requires the consent of DRD or a general authorisation to be given by DRD. The listing of Articles is not exhaustive but we cite some Articles as
12 exemplars. To ensure the status of the Authority as an independent regulator is not compromised, the Consumer Council considers that as a general principle the Authority’s powers of action should be unfettered and only in the most exceptional circumstances should the Authority need to seek the consent of DRD before exercising its powers under the draft Order.
32. A particular concern is the provision in Article 60(3) of the draft Order which permits DRD to give general directions to the Authority, with which the Authority must comply, indicating considerations to which the Authority should have regard when it appears to the Authority that any of its powers under Parts III to VII and IX of the draft Order are exercisable. This is a very wide and all embracing power the exercise of which would undermine the ability of the Authority to carry out its role as the regulator of economic and service delivery matters in an independent manner. As such, the Consumer Council considers that this provision should be removed from the draft legislation.
33. In this regard, it should be borne in mind that the Authority is not starting from scratch but is already an experienced regulator of the electricity and gas utilities with a well earned reputation for its professionalism and for carrying out its functions with fairness and impartiality.
34. With regard to disposal of land, the Consumer Council believes that legislation cover is minimal in this area. We agree with the Authority’s memo to the Strategic Investment Board, dated 13 July 2006 on land bank issues. In its memo the Authority raises the issue of whether the assets will be sold off or regarded as a source of flexibility to assist the GoCo’s financial stability. We fully support the Authority’s view that asset sales would require specific permission from the Authority and that the licence should be restrictive. This would be important to safeguard against the GoCo disposing of the land where efficiency targets are not met.
13 35. It should also be noted that land disposal is not just an issue of money. Land disposal would be of particular concern from the point of view of sustainable development, given that parts of the land are maintained as natural habitats. Loss of these could have a detrimental effect on Northern Ireland's biodiversity objectives. We strongly recommend that DRD must require the Authority’s approval in conjunction with the Environmental Regulator before permitting water and sewerage undertakers to dispose of any land.
Consultation with the Consumer Council
36. In line with the earlier principle outlined on page 5 that the consumer representative body must be consulted on all matters with implications or impacts on consumers the Consumer Council recommends that there should be a general duty on the water and sewerage undertaker and the economic and environmental Regulators to consult the Consumer Council in advance of the formulation or amendment of policies affecting consumers.
Metering
37. The Consumer Council argued strongly for universal metering to be implemented in a phased and targeted way with completion as soon as practicable, the costs to be initially met by DRD and recovered from consumers over the same 20-year period as the rest of the assets. Whilst the Consumer Council was disappointed that its argument was not accepted, it does nevertheless welcome the decision to offer the metering option, from the date of introduction of water and sewerage charging, to all pensioner households, to require the installation of meters in all new properties and first time connections and that there should be a managed long-term transition to widespread domestic metering. The Consumer Council also welcomes the DRD decision to rule out voluntary metering as it is not cost-reflective and leads to lower
14 income consumers paying more to subsidise the bills of higher income consumers without reducing overall consumption.
38. The Consumer Council is concerned that the published metering strategy is not definite both in terms of its targeted (or otherwise) approach and the deadline by which widespread metering must be achieved. In particular, we wish to see a timetable for the delivery of metering to be accelerated as reflected by the Minister7 on BBC Newsline on 8 December when he pronounced his expectation that Northern Ireland “within the next ten to fifteen years” will have “moved effectively completely across to metering … that is the way forward”. Minister Woodward went on to say: “We actually think, in years to come, other vulnerable groups should be able to apply; like lone parents for example, single householders. Now that will be a decision for future Ministers to make. It is where I would actually target the stage of metering”. We urge DRD to give high priority to developing proposals and costings for the managed transition to widespread domestic metering in the interests of sustainability, in consultation with the Consumer Council and others.
39. We note from Article 81 of the draft legislation that new connections will be required to have a meter installed. This policy supports compliance with European Directives – particularly the Water Framework Directive – requiring the promotion of the efficient use of water. The Consumer Council would suggest that Article 81 further supports our belief that metering is the only known way in which to satisfy Article 9 of the Water Framework Directive, which requires by 2010 a method of payment that provides “…Adequate incentives for users to use water resources efficiently…”
7 Minister Woodward on BBC Newsline 08.12.05
15 Business Model
40. Consumers, in most cases, are not overly concerned about actual ownership of water and sewerage services but are concerned about how a product or service is delivered. Consumers want a safe, clean and affordable service that provides an efficient, reliable and continuous water supply and sewage disposal.
41. However, when it comes to privatising water and sewerage services the public has expressed strong views. A 1993 Consumer Council survey found that 71 per cent of the Northern Ireland public were opposed to privatising the water supply. In the past ten years this opposition has grown – 92 per cent stated their opposition to privatisation in our 2002 Water Survey while just 4 per cent supported the option.
42. Against this background, the Consumer Council has previously stated that the provision of water and sewerage services should remain a public service delivered by a public authority. In our 2004 Water – A Clear Way Forward publication we made the following statement: For the future, legislation should be written to prevent publicly owned assets being sold privately at any stage in the future. The way in which the legislation is currently drafted would allow for changes to ownership of the water and sewerage services to happen without further legislation. Any possibility of changes to the ownership arrangements of the new GoCo must be preceded by a further round of public consultation and subsequent debate prior to introducing appropriate legislative amendment. The draft Order should be amended to provide for this.
Dual regulation model
43. Water and sewerage services are in the unique position of being regulated by two regulators and a consumer representative body. The Consumer Council believes that currently there is a lack of clarity regarding the working relationship between the two regulators and for
16 this reason we believe that there should be a formal agreement on co- ordination between the economic and environmental regulators (the Authority and the Department of the Environment/Environment and Heritage Service8) to ensure consistency of approach and coordinated decision-making. There should also be co-operation between the economic and environmental regulators and the consumer representative, whose roles will overlap. The primacy of responsibilities must be determined between the economic regulator, the environmental regulator or the consumer representative body. The Consumer Council requests clarification as to the adjudication of the working relationships between the various regulators including the Authority, Environment and Heritage Service and the Consumer Council.
Roads Drainage
44. The Consumer Council has expressed its concern that charges to consumers will include the cost of water drainage from roads. Householders should not have to pay for this, as it is not a domestic service. This is important because Northern Ireland has more than double the length of road per head of population than the rest of the UK. DRD has accepted that water consumers should not have to pay for roads drainage. However, they argue that it will not be possible to introduce highway and drainage charges until robust and accurate information on costs can be developed. The Consumer Council will work with DRD to give priority in 2007- 08 to determining how best to develop information about the costs of roads drainage to enable these costs to be removed from the charges levied on consumers.
45. It is vital that the consumer’s bill does not include any unnecessary or unfair elements. All costs must be appropriately attributed on the
8 Environment and Heritage Service (EHS) takes the lead in advising on, and in implementing, the Government's environmental policy and strategy in Northern Ireland. Its aims are "To protect, conserve and promote our natural environment and built heritage for the benefit of present and future generations."
17 concept of ‘user pays’. As a result, any costs removed from bills must be fully reflected through an associated reduction in consumers’ bills.
46. The Consumer Council would also welcome clarification that Regulations to be made under Article 202 will be able to provide for the introduction of charges for roads drainage and this will lead to a direct and full reduction in consumers’ bills.
Northern Ireland Water Council
47. In our response to the 2003 Water Reform consultation we stated our position that “We consider that the remit of the Northern Ireland Water Council is separate from that of consumer representation”. As stated in DRD’s 2003 Water Reform consultation: “The Water Council’s current remit is wide ranging on the full range of water, sewerage, environmental and recreational issues”. The Northern Ireland Water Council therefore deals with all aspects of water and its use in Northern Ireland – from the provision of clean drinking water and safe sewage treatment, to the safe and healthy use of waterways9.
48. The Consumer Council understands that Article 296 abolishes the Water Council, the functions of which will be superseded by the new regulatory regime. Prior to our agreement of dissolution of the Northern Ireland Water Council the Consumer Council requires absolute assurance from DRD that all of the responsibilities presently undertaken by the Water Council will be fully accommodated in the new structural arrangements under the water reform agenda and emerging legislation. Our original request for this information dates back to early 2005.
49. In conducting its gap analysis (tracking all of the Northern Ireland Water Council’s responsibilities) the Consumer Council requests confirmation that DRD considers, among others, the following issues. There is a
9 Northern Ireland Water Council (2002) Triennial Report 1999 - 2002
18 particular need to advise on international issues, especially international River Basin District issues, as required under the Water Framework Directive. Other considerations include the need for the scrutiny of legislation, the utilisation of internationally recognised expertise as currently exists on the Water Council and the need for an independent panel with the overarching ability to advise on any aspect of water and sewerage policy in an open and transparent way.
Other legislative issues for consideration
50. Integrated Financial Model (IFM): The Consumer Council further seeks re-assurance that the Integrated Financial Model within the NI Water Service’s Affordability Tariff recovers from the UK Treasury the £30 million cost of the affordability tariff to protect vulnerable domestic customers and that these costs are not passed on to other domestic consumers paying the full water and sewerage charge. Further views on this tariff are set out under Article 213 (pages 25 – 26).
51. Maximum Resale Price (MRP) for water: The Consumer Council seeks reassurance that the draft legislation ensures that private tenants and caravan owners and other affected clients are not charged above the MRP for water. Article 24 of the Gas (Northern Ireland) Order 1996 No. 275 (N.I. 2) explicitly refers to the Fixing of maximum charges for reselling gas as below.
(1) This Article applies to gas supplied to a consumer's premises by an authorised gas supplier, that is to say, a person who is authorised by a licence or exemption to supply gas to those premises.
(2) The Director shall from time to time direct that the maximum prices at which gas to which this Article applies may be resold— (a) shall be such as may be specified in the direction; or (b) shall be calculated by such method and by reference to such matters as may be so specified,
19 and shall publish directions under this Article in such manner as in his opinion will secure adequate publicity for them.
(3) A direction under this Article may— (a) require any person who resells gas to which this Article applies to furnish the purchaser with such information as may be specified or described in the direction; and (b) provide that, in the event of his failing to do so, the maximum price applicable to the resale shall be such as may be specified in the direction or shall be reduced by such amount or such percentage as may be so specified.
(4) Different directions may be given under this Article in different classes of cases, which may be defined by reference to areas, tariffs applicable to gas supplied by the authorised gas suppliers or any other relevant circumstances.
(5) If any person resells gas to which this Article applies at a price exceeding the maximum price determined by or under a direction under this Article and applicable to the resale— (a) the amount of the excess; and (b) if the direction so provides, interest on that amount at a rate specified or described in the direction, shall be recoverable by the purchaser.
(6) Nothing in this Article shall apply in relation to the resale of gas for use in a motor vehicle which is constructed or adapted to use gas as fuel for its propulsion.
Freedom of Information Act
52. The Consumer Council notes that the draft Order places general restrictions on the disclosure of information, for example Articles 50(3) and 265. The Consumer Council requests clarification from DRD that the provisions of any Articles related to disclosure of
20 information are compatible with the requirements of the Freedom of Information Act. We therefore believe, for example, that Article 50(3) may need to be deleted as it may, subject to verification, contravene requirements of the Freedom of Information Act. The Consumer Council seeks clarification of precedence in the event that there is conflict between the Water Order and the Freedom of Information Act.
Resources
53. It is essential that both the Authority and the Consumer Council are provided with the necessary resources to enable them to fully perform their respective roles under the draft Order from the day the draft Order comes into operation.
54. The Consumer Council acknowledges that this is recognised within DRD but would wish to stress the importance of all necessary resources being in place well before 1 April 2007 to ensure the readiness of both the Authority and the Consumer Council to provide a professional, effective and efficient service as from that date.
21 SECTION 4: KEY CHANGES TO BE MADE TO THE DRAFT LEGISLATION
Powers and duties of the Consumer Council
Article 55
55. This Article deals with the handling of consumer complaints, other than billing disputes, which are covered by Article 211 and dealt with separately later in this response.
56. One of the key reasons for selecting the Consumer Council as the water consumer representative body was its acknowledged track record of dealing with customer complaints in other utility areas, most notably in electricity and natural gas. The Consumer Council has developed a consistent approach to all utility complaints – a role accepted and underpinned by its relevant powers under the Energy Order (amending the UK Utilities Act 2000). This approach has been operated successfully by the Consumer Council in conjunction with the Authority10.
57. The problem with the draft Order is that Article 55(6) provides that, where it appears to the Consumer Council that a complaint relates to a matter which constitutes a dispute of a kind which can be referred to the Authority for determination under any provision of the draft Order, then the Consumer Council “shall”, with the consent of the complainant, refer the matter to the Authority. This use of the imperative “shall” would appear or could be used to rule out a role for the Consumer Council in the resolution of such cases and the filtering process would not therefore operate as all parties desire or in common with other utilities.
58. It has always been accepted by the Water Reform Unit, the Authority and the Consumer Council that a robust filter mechanism is needed to allow
10 “Authority” here refers to the Northern Ireland Authority for Energy Regulation (NIAER), which will become the Northern Ireland Authority for Utility Regulation (NIAUR).
22 for complaints/disputes to be resolved at the earliest possible stage in the resolution process. The first stage would be for the consumer to resolve the complaint/dispute directly with GoCo and hopefully many complaints/disputes would be resolved at this stage. However, if this first filter failed to resolve the complaint/dispute then the matter would escalate to the next stage with the Consumer Council becoming involved to try and broker a satisfactory outcome. Only where this second filter failed to resolve the matter would the option of bringing in the Authority to determine the complaint/dispute come into play.
59. The Consumer Council requires the insertion of a phrase such as “After its investigation” at the beginning of both Articles 55(3) and 55(6) to ensure that the Consumer Council can play its full legislative role in relation to water and it would be consistent with our full legislative role in dealing with gas and electricity complaints. This also reflects the common and agreed principles as set out in the existing memorandum of understanding between OFREG and the Consumer Council. The Council needs to have full discretion and flexibility, as we currently have for electricity and gas complaints, to consider all incoming complaints and decide, if appropriate, to refer some or all of these to the Authority. We consider it a fundamental necessity to secure this change. We reiterate the critical requirement to amend Article 55 to ensure that all stages of the filtering process as described above come fully into play in all cases.
Article 211
60. This Article empowers DRD to make Regulations to allow for billing disputes to be referred directly to the Authority for determination. The Authority and the Consumer Council are agreed that these disputes should be handled by the Consumer Council in line with current gas and electricity practices and, in the first instance, arrangements for this will be addressed in the Memorandum of Understanding to be drawn up between the Authority and the Consumer Council.
23 61. The Consumer Council considers that this provision is not necessary as the Memorandum of Understanding to be drawn up between the Authority and the Consumer Council will provide an adequate mechanism for determining the arrangements for the handling of billing disputes. The Consumer Council therefore strongly recommends that this Article is removed from the draft Order.
Powers and duties of the Authority
Article 201
62. This Article provides for the making of an annual “charges scheme” by GoCo to set out the charges it proposes to make. These schemes must be approved by the Authority but as neither the Authority, with its extended remit, nor GoCo will exist prior to April 2007, the first charges scheme will be made by DRD. Thereafter this power will transfer to the Authority and there will be five-year price reviews.
63. The Consumer Council understands the need for DRD to make the first charges scheme but would urge that both the Authority and the Consumer Council are fully consulted as the scheme is developed and in sufficient time to study the proposals and make comments before the scheme comes into operation. Such charges, after 2010, will be based on financial modelling conducted by NI Water Service and regulated by the Authority. The Consumer Council seeks quality assurance of assumptions being made on NI Water Service’s Business Plan as soon as it is published.
64. Article 201(7) provides that a charges scheme must be approved by the Authority before it can take effect. However, Article 201(8) then provides that DRD may give guidance to the Authority on the exercise of its approval power and the Authority must have regard to that guidance in the exercise of that power. The Consumer Council is concerned that once again the Authority appears to have been given a straightforward
24 approval function but at the same time DRD is given power to constrain the Authority’s approval role, which clearly raises issues about the independence of the Authority. This is not consistent with existing provision for energy and does not reflect the principle of the Authority having the same powers relating to water as to energy. Regulatory licence must take precedence after the first charging regime. DRD must have no role in advising the Authority after 2010 on the charging scheme. The Consumer Council therefore requests that Article 201(8) should be removed from the draft Order.
Affordability Tariff
Article 213
65. The Consumer Council notes that when the draft Order comes into operation DRD will have an obligation to pay grants to GoCo in respect of discounts provided by it in compliance with Regulations made under Article 202 which will provide, inter alia, for an affordability tariff for lower income groups. These grants will be payable during the three years commencing with the introduction of charging. After that period, DRD will have power to pay grants to GoCo for those purposes at its discretion.
66. The Consumer Council believes that the draft legislation falls well short of DRD’s commitment to the Affordability Tariff. Principally, we are concerned at the possibility, unless it is clearly defined, that the affordability tariff could cease to be available for lower income groups after the end of the three-year period commencing with the introduction of charging or that, after three years, the burden of the Government’s social responsibility is placed on consumers – in contradiction of our understanding of the agreement with the Minister in December 2005. We view it as unacceptable that provision is only being made for a three- year period. If the principles of fairness, affordability and sustainability are truly accepted in Water Reform then we strongly believe that the
25 principle of affordability must be enshrined in legislation before and after 2010. Legislative provision must exist for an incoming Legislative Assembly to modify and/or enhance the Affordability Tariff as discussed at our meeting with the former Minister for Regional Development on 28 November 2005. We further believe that the legislation must be explicit in providing for the Government to fund the Affordability Tariff and not through higher bills for other consumers.
67. The Affordability Tariff is only secure until 2010. Whilst we recognise that there is a possibility for this to continue beyond 2010 there is no power or compulsion for it to continue after 2010 or to be paid for by the Government and not through higher bills. The Consumer Council therefore asks DRD for:
a. An assurance, enshrined in legislation, that this tariff will continue to be made available for as long as there are vulnerable groups in Northern Ireland who meet the criteria specified for eligibility; b. An assurance that the legislation will make provision for the scheme to be extended to include other vulnerable consumer groups, as appropriate. At a meeting between the Consumer Council and Minister Woodward on 28 November 2005, the Minister made a commitment that the legislation would give provision for the scope of the affordability tariff to be further enhanced to include vulnerable groups by an incoming Assembly; c. An assurance that the legislation will recognise the importance of ensuring that there is no cross subsidy and other consumers are not required to meet the cost of the Affordability Tariff through higher bills.
26 SECTION 5: ADDITIONAL COMMENTS ON THE DRAFT LEGISLATION
Work Programme/Information Sharing: Article 4(7)
68. Paragraph (7) of Article 4 requires the Authority to send a copy of a notice given about a forward work programme, other than a combined forward work programme (Article 4(4)), to the Consumer Council and DRD. There is no requirement in Article 4 to send a copy of a notice given about a combined forward work programme to the Consumer Council and DRD nor is this addressed in Article 5 of the Energy Order.
69. The Consumer Council considers that Article 4 – perhaps paragraph (4) – should be amended to provide that a copy of a notice about a combined forward work programme should be sent to the Consumer Council and DRD.
Protecting the Interests of Consumers: Article 6(3)
70. This Article requires DRD and the Authority, in seeking to protect the interests of consumers, to have regard to the interests of:
The disabled or chronically sick;
Pensioners;
Persons on low incomes; and
Residents of rural areas.
71. The Consumer Council is pleased that special recognition will be taken of the interests of these groupings.
Duties of the Department for Regional Development and the Authority: Article 6(5)
72. DRD and the Authority, in carrying out their regulatory functions, must seek to:
27 Contribute to the achievement of sustainable development;
Encourage undertakers to maximise economy and efficiency;
Ensure no undue discrimination in the setting of charges across the customer base;
Act in the consumers’ interests on land sale matters; and
Ensure probity in the dealings of undertakers.
73. The Consumer Council welcomes the fact that in carrying out their primary duties both DRD and the Authority must have regard to these key principles.
The Council’s Work Programme: Article 46
74. Article 4(4) of the draft Order allows the Authority to combine its forward work programme prepared as required by that Article with the forward work programme it is required to prepare under Article 5 of the Energy (Northern Ireland) Order 2003. Article 46 does not allow the Consumer Council to similarly combine the forward work programme prepared by it under Article 46 with the forward work programme it is required to prepare under Article 10 of the Energy Order.
75. The Consumer Council responded to the Water Reform Unit’s draft list of consequentials resulting from the proposed Draft Water and Sewerage Services (Northern Ireland) Order 2006. In responding to the proposal set out under 2003 NI 6 on page 41 relating to the Consumer Council’s work programme we asked, in the interests of efficiency, that the legislation be amended to allow the Consumer Council to combine its forward work programme for both energy and water into a single work programme if it so wishes. This would be in line with the Authority. In our response to the draft legislation we reiterate our position that the Consumer Council may be allowed to publish both energy and water forward work programmes as a combined document.
28 Co-operation Between the Council and EHS: Article 47
76. The Consumer Council requires that a new Article 47(1)(c) should be inserted to include a provision of a duty for co-operation between the Consumer Council and Environment and Heritage Service/Department of the Environment, as appropriate.
Duty to Provide Information: Article 52
77. The Consumer Council requires that a new Article 52(1)(c) should be inserted to include a provision of a duty for the Environment and Heritage Service/Department of the Environment, as appropriate, to provide information to the Council.
Duty to Supply Information: Article 53
78. The Consumer Council suggests that Article 53(1) should be amended to empower the Environment and Heritage Service/Department of the Environment, as appropriate, to direct the Council to supply information that these bodies may require for the purpose of exercising their functions under the Order.
Duty to Consult the Council: Article 58
79. Currently there is no duty on the water and sewerage undertaker to consult the Consumer Council. We believe this is a weakness under present arrangements and therefore such powers requiring the water and sewerage undertaker to consult the Consumer Council on matters of interest to consumers should be introduced.
Powers of the Authority (Water): Article 65
80. This Article is concerned with the general duty of a water undertaker to develop and maintain an efficient and economical system of water supply within its area. The undertaker’s obligation to meet its water supply duty is enforceable by DRD, or the Authority, if DRD delegates responsibility
29 to it. The Consumer Council is anxious to ensure that the Authority is in a position to act as an independent and effective regulator and considers that it should have direct and exclusive enforcement powers from the commencement of the draft Order in relation to this primary duty of GoCo and not via DRD, in line with best practice utility regulation both here and elsewhere.
81. In this regard, the differences in the structures for the delivery of water and sewerage services between GB and Northern Ireland are very relevant. In GB there are various water and sewerage undertakers covering the different regions with OFWAT acting as the economic and consumer regulator of water and sewerage services and the relevant Department having an overarching oversight role. However, in Northern Ireland for the foreseeable future water and sewerage services will be provided by GoCo in which DRD will be the sole shareholder. In these circumstances, the Consumer Council does not consider that the Authority should need to obtain DRD consent before it could take enforcement action against GoCo in relation to this primary duty of GoCo to develop and maintain an efficient and economical system of water supply within Northern Ireland. If this were to be the case it would impinge on the Authority’s status as an independent regulator and seriously undermine its credibility.
82. The Consumer Council requests DRD to undertake to give the Authority a general authorisation under Article 65(2)(b) of the draft Order to enforce this primary duty of GoCo from the day the draft Order comes into operation. It is understood that OFWAT operates under a similar “general authorisation” in GB despite the differences in the structures of water and sewerage services delivery in the two jurisdictions to which mention has already been made.
30 Consult on Water Resource Management Plans: Article 70
83. The Consumer Council requires that a new Article 70(8)(d) should be inserted to include a provision of a duty on the water undertaker to consult with the Consumer Council on water resource management plans. The Authority’s letter of 19 May 2006 to DRD contains issues that provide strong evidence of the need for this provision. The Consumer Council fully supports all of the issues raised within this letter. In tandem with the Authority we await a response to the points raised within this letter.
84. Water Resource Management Plans become statutory for all water companies in 2007. The Consumer Council believes there is an immediate need to provide a Water Resource Management Plan in consultation with us. We further believe that the legislation must be prescriptive in terms of when such Water Resource Management Plans must be reviewed and published.
85. Alternatively, the Consumer Council requests reassurance that NI Water Service’s Water Resource Strategy and Water Efficiency Plan (January 2004) would satisfy the requirement for a Water Resource Management Plan. We would also wish to better understand and have input into the consultation and approval mechanism for Water Resource Management Plans including timing, review, frequency and approval method, and whether EHS will have a duty to regulate the Plan.
Consult on Drought Plans: Article 73
86. The Consumer Council requires that a new Article 73(7)(d) should be inserted to include a provision of a duty on the water undertaker to consult with the Consumer Council on drought plans. Again, the Authority’s letter of 19 May 2006 to DRD contains issues that provide strong evidence of the need for this provision.
31 Promote Water Efficiency: Article 145
87. This Article is concerned with the general duty of a water undertaker to promote the efficient use of water by its customers. The undertaker’s obligation to promote the efficient use of water by customers is enforceable by DRD, or the Authority, if DRD delegates responsibility to it. The Consumer Council considers that the Authority should be given a general authorisation to enforce this key duty from the outset rather than having to seek the prior consent of DRD before taking enforcement action.
88. The Consumer Council requests DRD to undertake to give the Authority a general authorisation under Article 145(2)(b) of the draft Order to enforce this important duty of GoCo from the day the draft Order comes into operation. It is understood that OFWAT operates under a similar “general authorisation” in GB.
Powers of the Authority (Sewage): Article 149
89. This Article sets out the general duty of a sewerage undertaker to provide, improve, maintain, cleanse and extend public sewers so as to provide effectual drainage and to deal with the contents of sewerage effectually. In carrying out this duty the undertaker must take account of the need to accept the discharge of trade effluent into its sewers and provide for its disposal. The undertaker’s obligation to meet its sewerage supply duties is enforceable by DRD, or the Authority, if DRD delegates responsibility to it. Again, the Consumer Council considers this to be a key element of the enforcement regime and raises questions about the status of the Authority as an independent and effective regulator if it is not to have direct enforcement powers from the outset.
90. The Consumer Council requests DRD to undertake to give the Authority a general authorisation under Article 149(3)(b) of the draft Order to enforce this key duty of GoCo from the day the draft Order
32 comes into operation. It is understood that OFWAT operates under a similar “general authorisation” in GB.
Provision of Sewers: Article 157
91. This Article is concerned with a further duty of a sewerage undertaker to provide sewers where the drainage of any premises is having an adverse environmental impact. The undertaker’s obligation to meet this duty is enforceable by DRD, or the Authority, if DRD delegates responsibility to it. This is another instance where the Consumer Council considers that to be seen to function as an independent and effective regulator the Authority should be given a general authorisation by DRD to enforce this provision from the date of commencement of the draft Order.
92. The Consumer Council requests DRD to undertake to give the Authority a general authorisation under Article 157(6)(b) of the draft Order to enforce this key responsibility of GoCo from the day the draft Order comes into operation.
Adoption of Sewers: Article 159
93. This Article is concerned with the adoption of sewers, lateral drains and waste water treatment works by a sewerage undertaker. A sewerage undertaker can forcibly adopt sewers, drains and waste water treatment works and can also be requested by the owners of such facilities to make a declaration in respect of their adoption. However, the sewerage undertaker may not make a declaration for the adoption of sewers and waste water treatment works constructed before 1 October 1973 or a lateral drain constructed before the transfer date.
94. The Consumer Council requests DRD for an explanation of the rationale behind this provision and the significance of the “1 October 1973” date. An indication of the implications for the owners of facilities that cannot be adopted under this Article would also be appreciated.
33 Affordability Tariff: Article 264
95. Article 264 allows for new or altered criteria for access to the affordability tariff to be introduced in the future. The Consumer Council requests further clarification to clarify the thinking behind the inclusion of this Article in the draft Order.
Direction to the Council: Article 295
96. Articles 295(4) and (5) provide for a direction to the Council by DRD and Article 295(6) provides that the Council must comply with such a direction. The Consumer Council requests clarification regarding the rationale behind the inclusion of this provision in the draft legislation.
Specific Drafting Points
97. A list of drafting points noted during our examination of the draft Order has been complied and is attached overleaf as Section 4 to this response.
98. DRD is invited to consider the drafting points listed in Section 4 overleaf.
99. The Consumer Council would request that DRD give careful consideration to the comments in both this response and the attached Annexes. We will of course be happy to meet with DRD officials to discuss any of these matters in more detail if DRD feels that such a discussion would be helpful.
34 SECTION 6: DRAFTING POINTS
Draft Water and Sewerage Services (Northern Ireland) Order 2006
Provision Comment Article 2(1) Should a definition be inserted for DETI – the Department of Enterprise, Trade and Investment – in view of the reference to “DETI” in Article 42(2)(d)? If agreed, the reference to “the Department of Enterprise, Trade and Investment” in Article 46(6) could be replaced by a reference to “DETI”. Article 2(1) In the definition of “resource main” an additional bracket should be inserted after “paragraph (2)” in line 1. Article 3(3) Double quotes should be inserted at the end of the proposed new paragraph (1) of Schedule 1 to the Energy (Northern Ireland) Order 2003. Article 30(1) Should the word “enforcing” in line 2 be replaced by the word “enforcement”? Article 41(1) Should the comma after the word “managed” in line 5 be deleted? Article 41(4) The word “administrative” in line 4 should be replaced by the word “administration”. Article 54(2) Should the words “under Chapter 1” be inserted after the word “appointed” in line 2? Article 54(5) Should the words “under Chapter 1” be inserted after the word “appointed” in line 1? Article 55(12) The word “in” should be inserted after the word “Department” in line 3. Article 70(8) The word “and” at the end of paragraph (a) should be deleted. Article 85(5)(a) The reference to “Article 79(3)(a)” in line 2 should be replaced by a reference to “Article 79(4)(a)”. Article 113(1) The third sub-paragraph should be sub-paragraph “(c)” and not “(b)”.
35 Article 113(2)(c) The initial capital in the word “Regulations” in line 2 should be replaced with a lower case “r” for consistency. Article 118(2)(b) Should the semi-colon at the end of this sub-paragraph be replaced by a comma? Article 125(4)(a)(i) It is suggested that the words “an undertaker” in lines 1 and 2 should be replaced by the words “a water undertaker”. Article 140(5) The word “or” should be inserted after the word “undertaker” in line 1 of the definition of “compensation water”. Article 155(3) The reference to “water main” in line 2 should be replaced by a reference to “a public sewer or a lateral drain”. Article 163(3)(a) Is the word “or” at the end of this sub-paragraph necessary? Article 167(1)(a) A semi-colon should be inserted after the word “system” in line 4. Article 167(7)(b), (c) and (d) Should the references to “existing undertaker” in these sub- paragraphs not be references to “established undertaker”? Article 168(1)(a)(ii) A comma should be inserted after the word “contents”. Article 168(1)(a) Is the word “or” at the end of this sub-paragraph necessary? Article 173(1) Should the word “and” in line 1 be replaced by the word “or”? Article 177(2) The reference to “sub-paragraph” in line 3 should be replaced by a reference to “paragraph”. Article 177(3) The references to “sub-paragraph” in line 2 and lines 5/6 should be replaced by references to “paragraph”. Article 177(11) Should the reference to “paragraph (9)” in line 2 not be a reference to “paragraph (8)”? Article 178(6) The additional full stop at the end of the paragraph should be deleted. Article 190(4)(a) The word “or” at the end of the sub-paragraph should be deleted.
36 Article 199(2)(c) The semi-colon at the end of the sub-paragraph should be replaced by a comma. Article 199(2) The additional full stop at the end of the paragraph should be deleted. Article 208(4) It is suggested that the words “an undertaker” in line 1 should be replaced by the words “a relevant undertaker”. Article 211(9) It is suggested that the word “relevant” should be inserted before the word “undertaker” in line 2. Article 213(3)(b) The word “him” in line 3 should be replaced by the word “it”. Article 218(5)(3)(b) It is suggested that the word “relevant” should be inserted before the word “undertaker” in line 3, being the first reference to an undertaker in that paragraph. Article 219(2)(b) A full stop should be inserted at the end of this sub-paragraph. Article 219(6)(b)(i) The word “or” at the end of this head should be deleted. Article 220(3) It is suggested that a comma should be inserted after the word “paragraph” in line 3. Article 223(2)(a) The word “or” at the end of this sub-paragraph should be deleted. Article 223(4)(b) The word “supplied” should be inserted after the word “partly” in line 2. Article 223(4)(e) It is suggested that the word “relevant” should be inserted before the word “undertaker” in line 1. Article 223(5)(a) It is suggested that the word “relevant” should be inserted before the word “undertaker” in line 2. Article 227(4)(a) It is suggested that the word “an” before the word “undertaker” in line 1 should be replaced by the words “a water”. Article 227(7) It is suggested that the word “water” should be inserted before the word “undertaker” in line 3.
37 Article 230(3)(c) It is suggested that the word “water” should be inserted before the word “undertaker” in line 2. Article 236(6)(a) The word “or” at the end of this sub-paragraph should be deleted. Article 236(6)(b) A comma should be inserted after the word sewer in line 2. Article 244(1)(a) The word “his” in line 2 should be replaced by the word “its”. For clarity, it might be best to replace the words “its exercise” in line 3 by the words “the exercise by the undertaker”. Article 246(1)(b)(i) The word “the” at the end of line 1 should be deleted. Article 246(3) The word “the” should be inserted before the word “Airports” in line 2. Article 250(1)(a) A comma should be inserted after the word “of” in line 3. Article 259(8) The words “to” and “are” at the end of line 1 should be transposed and the word “Article” in line 2 should be in the plural. Article 261(2)(a) and (b) Should the three references to “enforcing authority” in these sub- paragraphs be replaced by references to “enforcement authority”? Article 261(6) Should the reference to “enforcing authority” in line 2 be replaced by a reference to “enforcement authority”? Article 262(3) A comma should be inserted after the word “conviction” in line 2. Article 264(1)(a)(i) and (b)(i) It is assumed that references to passport benefits other than housing benefit are to be inserted in these heads. Article 265(3)(g) The word “and” after the word “Enterprise” in line 2 should be replaced by a comma unless it is decided to include a definition of “DETI” in Article 2(2) – see the first entry in relation to Article 2(1) above – in which case a reference to “DETI” can be inserted in place of the full title of the Department. Article 265(3)(k) The word “his” in line 2 should be replaced by the word “its”.
38 Article 265(3)(n) The full stop at the end of this sub- paragraph should be replaced by a semi-colon. Article 265(5) The reference to paragraph (3)(k) in line 2 should be a reference to paragraph (3)(m). Article 293(4)(a) The comma after the word “shall” in line 1 should be deleted. Article 293(6) It is suggested that the word “Appeals” should be inserted before the word “Commission” in line 2. Article 293(14) In the definition of “the relevant Department” it is suggested that the word “Appeals” should be inserted before the word “Commission” in line 1, being the first reference to the Appeals Commission in that definition. Article 295(1)(b) Should the comma after the word “preventing” in line 1 be deleted? Article 296(2)(a) Should the reference to the “1999 Order” not be a reference to the “Water Order”? Article 299(2) A space should be inserted between the word “or” and “227” in line 2. Article 300(1) Article 297(3) provides that regulations may not be made under that Article unless laid before and approved by resolution of the Assembly. Has similar provision been made in respect of regulations to be made under Article 15(1) or (2)? Article 300(2)(e)(ii) The word “and” at the end of this head should be deleted. Article 303(6) Is the reference to Schedule AI to the Interpretation Act (Northern Ireland) 1954 in line 1 correct? Schedule 1, paragraph 1(5) Despite section 37(2) of the Interpretation Act (Northern Ireland) 1954, it is suggested that the word “liability” in line 2 should be replaced by the word “liabilities”. Schedule 1, paragraph 3(2)(a) The word “or” at the end of this head should be deleted. Schedule 1, paragraph 3(5)(c) The word “sub-paragraph” in line 1 should be replaced by the word “head”.
39 Schedule 1, paragraph 3(9)(b) A comma should be inserted after the word “made” in line 2. Schedule 1, paragraph 3(10) The word “Paragraph” in line 1 should be replaced by the word “Sub-paragraph”. Schedule 1, paragraph 5(3) The word “employee” in line 1 should be replaced by the word “appointee”. Schedule 3 For consistency with the shoulder note to Article 105, it is suggested that the heading to this Schedule should be amended to read: ”PROCEDURE FOR ORDERS RELATING TO CONSTANCY AND PRESSURE”. Schedule 4, paragraph 2(2)(b) Should the word “reasonably” be inserted before the word “apprehended”? – compare paragraph 7(2)(b) of this Schedule. Schedule 4, paragraph 2(2)(d) The word “or” should be inserted at the end of this head. Schedule 4, paragraph 2(2)(e) Should the word “proposed” be inserted before the word “entry”? – compare paragraph 7(2)(f) of this Schedule. Schedule 5, paragraph 1(2) Heads “(f)” and “(g)” should in fact be heads “(e)” and “(f)”. Schedule 6, paragraph 1(1) It is suggested that the word “on” in line 2 should be replaced by the word “upon” for consistency with the wording used later in the paragraph. Schedule 6, paragraph 1(3) Should the word “water’s” in line 1 be replaced by the word “water”? Schedule 6, paragraph 2(1) Should the words “for the order” be inserted after the word “applicant” in line 2? Schedule 7, paragraph 4(1) Is it the intention that the reference to “the Department” in this paragraph is a reference to DRD, in view of the definition of “the Department” in Article 2(2), or is it intended to be a reference to “DOE” as mentioned earlier in the paragraph? Schedule 8, paragraph 2(4)(b) A comma should be inserted before the word “an” in line 2.
40 Schedule 8, paragraph 4(1) It is suggested that the words “byelaw applies” in line 4 should be replaced by the words “byelaws apply”. Schedule 9, paragraph 5(1) It is suggested that the word “water” should be inserted before the word “undertaker” in line 2. Schedule 9, paragraph 5(2)(b)(iii) It is suggested that the word “water” should be inserted before the word “undertaker” in line 1. Schedule 9, paragraph 5(3) It is suggested that the word “water” should be inserted before the word “undertaker” in line 1. Schedule 9, paragraph 5(5)(b) It is suggested that the word “water” should be inserted before the word “undertaker” in line 3. Schedule 9, paragraph 7(7)(a) A comma should be inserted after the word “applicable” in line 3. Schedule 10, paragraph 6 Are the words “of this Schedule” in both line 1 and line 2 necessary in view of section 11 of the Interpretation Act (Northern Ireland) 1954? Schedule 11, paragraph 2(8)(b) A comma should be inserted after the word “made” in line 2. Schedule 11, paragraph 2(9) The word “Paragraph” in line 1 should be replaced by the word “Sub-paragraph”.
41 ANNEX 1: SUPPORTING INFORMATION ON LEAKAGE
Leakage and Cost
2003 – NI Water Service‘s leakage rate was 37 per cent - A total of 250 million litres of water a day was lost in Northern Ireland according to the Assembly’s Public Accounts Committee11. 2004 – NI Water Service’s leakage rate was 34 per cent (a target of 233 million litres per day) 2006 – NI Water Service’s leakage rate was 26 per cent (a total of 178 million litres per day)
NI Water Service’s Investment portfolio Over the five years between 1999 and 2004, £80 million was invested on renewing water mains. Between 2004 and 2009 the intention is to invest a further £100 million. With particular regard to leakage, NI Water Service has invested £37 million on leakage reduction measures over the past six years period, while a further £13 million will be invested over the next two years12.
In contrast, water companies in England and Wales have invested more than £50 billion in the water and sewerage network including pipes, sewers, reservoirs, and treatment works since privatisation13. Meanwhile, Scotland is investing £700 million in 2007 and 200814, and £1.8 billion has been invested in more than 2,000 projects to improve the infrastructure in Scottish Water’s four-year history15.
In 2004 NI Water Service claimed that approximately 20 per cent of total leakage is on private property and is the responsibility of consumers16. This has since increased to 28 per cent being the consumers’ responsibility in 200617. As a comparator, Thames Water estimates that approximately one- quarter of all leakage is on customers’ pipes18.
Consumers understand the need for restrictions but resent bans (almost 13 million people are now affected by hosepipe and sprinkler bans19) if they cannot see water companies doing enough to secure future supplies, for example by tackling leaking pipes20. The Consumer Council is concerned that customers are picking up the cost of all leaks – not just those leaks from the boundary to our property. There is no risk accrued to NI Water
11 Department for Regional Development (2003) The Reform of Water and Sewerage Services in Northern Ireland: Public Consultation Report p.14 12 Water Service (2006) Water News July 2006 p.2 13 Consumer Council for Water (2006) Too Precious to Waste: Review 2006 p. 9 14 Utility Week (2006) Contractor Crisis Looms 26.05.06 p. 5 15 Scottish Water (2006) Scottish Water Beats Efficiency Targets 20.06.06 http://www.scottishwater.co.uk/portal/page?_pageid=219,4804148&_dad=portal&_schema=P ORTAL 16 Water Service (2004) Water Efficiency Plan p. 4 17 Personal Communication with William Duddy 10.05.06 18 Thames Water Press Release (2006) Leakage Comes Down But More to Do 21.06.06 19 Which? (2006) Running On Empty July 2006 p.32 20 Consumer Council for Water (2006) Too Precious to Waste: Review 2006 p. 9
42 Service. Meanwhile, the onus continues to be on the consumer to save and conserve water while all the benefits accrue to the NI Water Service since a charging regime based on capital value provides no incentive to reduce water use.
Leakage comparisons with other water and sewerage companies The UK has more than 335,000km of mains; the main problems are the age and poor condition of pipes resulting from decades of inadequate investment21. England and Wales has 24 million connections22. In 2004-5 in England and Wales £284 million was spent on underground infrastructure renewals and 2,350km of mains were renewed23. Around 3.5 billion litres of water was lost from the system in England and Wales in 2004/524 compared with 5,000 million litres per day a decade earlier25.
In the worst affected areas companies, with the agreement of regulators, are moving from a ‘find-and-fix’ policy to wholesale mains replacement, targeting a reduction of 300 million litres a day by 2010; enough water for the needs of 2 million people26. In England and Wales water leakage has been cut by 30 per cent since 1995 and companies will invest £1.5 billion in leakage control during the current planning period (2005-10)27. OFWAT estimates that it would cost around £2.5 billion to reduce leakage by a further 10 per cent28.
The tables below illustrate the estimated levels of leakage for the individual water and sewerage companies in the UK. As can be appreciated from Table 1, NI Water Service’s leakage record is worse (on a per head of population basis) than Thames Water that has so recently received so much press attention for its poor leakage record.
Table 1: Company estimates of total leakage 2004/-5 (Ml/day)29 Water and Sewerage Ml/day l/day/person Population Water Company (million) mains length (km) Thames 915 114.4 8.0 32,000 Severn Trent 502 67.8 7.4 45,674 United Utilities 500 172.4 2.9 40,600 Yorkshire 293 172.4 1.7 40,000 Welsh Water 226 188.3 1.2 27,000 Anglian 214 82.3 2.6 36,000 NI Water Service 20330 119.4 1.7 25,000
21 Water UK Press Release (2006) Leakage in the News 04.07.06 22 House of Lords Debate on Water Supply: OFWAT 28.06.06 23 Water UK Press Release (2006) Leakage in the News 04.07.06 24 Consumer Council for Water (2006) Too Precious to Waste: Review 2006 p. 9 25 BBC News Online (2006) Thames and Severn Rapped on Leaks http:news.bbc.co.uk/1/hi/business/5202432.stm 26 Water UK Press Release (2006) Leakage in the News 04.07.06 27 Water UK Press Release (2006) Leakage in the News 04.07.06 28 Which? (2006) Running On Empty July 2006 p.32 29 OFWAT (2005) Security of Supply, Leakage and the Efficient Use of Water: 2004-2005 Report p.31
43 Northumbrian North 155 59.6 2.6 16,789 Southern 92 46.0 2.0 13,000 South West 83 51.9 1.6 10,000 Wessex 73 60.8 1.2 10,000 Northumbrian South 67 Scottish Water* 1,139.3 517.9 2.2 46,000
* Scottish Water's reported total leakage was 1139.30ML/d in 2004-0531. This represents 48 per cent of the distribution input. This is based on a top-down approach (distribution input minus other demand components), rather than a measured figure. Scottish Water has a program to address this - detailed in its Delivery Plan – and it is hoped that the accuracy of this figure will improve. Based on limited measured information for certain areas, the figure was 964 ML/d, however Scottish Water chose to officially report the higher figure.
Table 2: Company estimates of total leakage 2004/-5 (Ml/day)32 Water Only Companies Ml/day l/day/person Population Mains length Three Valleys 149 51.4 2.9 14,277 km South Staffordshire 74 59.2 1.25 5,722 km South East 69 46.0 1.5 9,665 km Bristol 53 53.0 1.0 1,000 miles Portsmouth 30 103.4 0.29 3,000 km Mid Kent 29 138.1 0.21 2,662 miles Sutton & East Surrey 24 88.9 0.27 3,372 km Bournemouth & West 22 52.4 0.42 2,745 km Hampshire Cambridge 14 48.3 0.29 453 miles Dee Valley 11 42.3 0.26 1,970 km Folkestone & Dover 8 2.5 3.2 ???????? Tendring Hundred 5 71.4 0.07 910 km
International experience of leakage Looking to international experience, Israel has 4 per cent unaccounted for water (leakage) and Tokyo similarly has 4 per cent leakage33. Indeed, Northern Ireland’s leakage rate is comparable to developing Eastern European countries rather than Western European countries where leakage rates are as low as 9 per cent34.
30 Water Service (2006) Personal Communication with Mr Brian McCalmont 13.06.06. Water Service has reduced its leakage to 178Ml/day for year ending 31 March 2006 31 Water Industry Commission for Scotland (2005) Annual Return 2004-05 p.23 32 OFWAT (2005) Security of Supply, Leakage and the Efficient Use of Water: 2004-2005 Report p.31 33 London Assembly Health and Public Services Committee (2006) Drought in London July 2006 34 OECD, Sustainable Water Use in Europe
44 Economic level of leakage In January 2004 the NI Water Service’s Water Efficiency Plan stated that NI Water Service’s economic level of leakage (ELL) was 24.2 per cent35 (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. Against the background of DEFRA’s concern that companies’ ELLs may not take proper account of the full range of costs and benefits, including environmental costs, and commands neither the understanding nor the confidence of the public36, the Consumer Council wishes to better understand the methodology behind the setting of ELLs.
As can be appreciated from Table 3, 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.
Table 3: Water & Sewerage Companies’ Leakage Targets 07/08 (Ml/day)37 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 16538 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
Table 4: Water Companies’ Leakage Targets 2007/08 (Ml/day)39 Water Only Companies Ml/day Three Valleys 145 South Staffordshire 75 South East 69 Bristol 54
35 Minister Spellar’s Speaking Notes for the Launch of the Water Efficiency Plan on Monday 12 January 2004 36 Department for the Environment, Food and Rural Affairs (2006) 20 Million Litres of Water Lost Through Leakage 21.07.06 37 OFWAT (2005) Security of Supply, Leakage and the Efficient Use of Water: 2004-2005 Report p.36 38 Water Service (2006) Personal Communication with Mr Brian McCalmont 13.06.06. 39 OFWAT (2005) Security of Supply, Leakage and the Efficient Use of Water: 2004-2005 Report p.36
45 Portsmouth 30 Mid Kent 27 Sutton & East Surrey 25 Bournemouth & West Hampshire 22 Cambridge 14 Dee Valley 11.2 Folkestone & Dover 8.2 Tendring Hundred 5.1
The Chief Executive of 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. Currently the ELL focuses on economics and determines a level that implies efficiency but the environmental damage remains unknown equating to a more difficult cost/benefit analysis40. Similarly, the London Assembly has called on water companies to reduce leakage beyond the economic level41.
Four of the 22 water firms (Thames Water, Severn Trent, United Utilities and Southern Water) in England and Wales failed to hit their leakage targets for 2005/06 losing 76 million litres of water per day in excess of the leakage targets set for them by OFWAT42.
Four companies currently supply London with water: Thames Water (supplies 76 per cent of the population); Three Valleys Water (14 per cent); Essex & Suffolk Water (6.6 per cent), and Sutton & East Surrey (3.7 per cent)43.
The ELL’s for the four water companies in London have the following leakage results and targets44:
Table 5: London water companies’ leakage results and targets Water company 2004/5 ELL (Ml/day) 2004/5 Leakage (Ml/day) Thames Water 905 915 (33%) Sutton & East Surrey 25 24 (15%) Three Valleys Water 150 149 (17%) Essex & Suffolk 70 67 (14%)
Against this background the following section of the paper discusses Thames Water’s leakage performance.
40 Utility Week (2006) Troubled Water 24.03.06 41 London Assembly Health and Public Services Committee (2006) Drought in London July 2006, p.4 42 Daily Mail (2006) Revealed: The Water Firms Missing Targets Amid Rising Profits 21.07.06 43 London Assembly Health and Public Services Committee (2006) Drought in London July 2006, p.6 44 London Assembly Health and Public Services Committee (2006) Drought in London July 2006, p.8
46 Thames Water Thames Water is England’s largest water supplier, serving eight million customers. The network stretches 20,000 miles (32,000 kilometres) and contains 18 million joints45. Thames has one of the oldest networks in the country with one-third of its mains dating back more than 150 years46. Thames is investing £1 billion replacing old Victorian pipes, which are estimated to leak around one-third of water travelling from reservoirs to homes47. Last year (2005/6) Thames Water reduced leakage by 2 per cent48. Over the period Thames Water fixed 87,000 leaks (240 per day or one every six minutes)49. By 2010, investment by Thames Water to improve services for customers will have topped £9 billion50.
Thames is leaking 894 million litres of water per day. The OFWAT target for leakage for Thames is 860 million litres per day. This is the third successive annual leakage target that Thames has missed. OFWAT has stated that Thames must spend an extra £150 million on reducing leakage and securing water supply51. Over the period 2005-10 Thames Water is investing £1 billion (£0.5 million per day) fixing 230 miles of pipes to reduce leakage52. OFWAT secured a legally binding undertaking from Thames Water to replace additional leaking water mains at the £150 million expense of its shareholders on 04.07.0653. This £150 million is on top of the £500 million which Thames Water had already promised to spend on 767 miles of its network54.
OFWAT is able to impose a financial penalty of up to 10 per cent of the water company’s turnover55. However, OFWAT is not fining Thames Water for their leakage failure. Meanwhile, Severn Trent has been put on notice for its poor leakage performance. Any money raised from OFWAT fines goes straight to the Government’s consolidated fund rather than being redistributed to customers who have paid for the improvements that water companies have failed to deliver 56. Meanwhile, Thames Water has spent £1.8 million on an advertising campaign highlighting the company’s success in saving water. £1.8 million is enough to replace around three miles of leaking mains57.
45 Thames Water Press Release (2006) Leakage Comes Down But More to Do 21.06.06 46 The Independent (2006) Thames Escapes Fines as Leak Targets are Relaxed (05.07.06) 47 Daily Mail (04.07.06) Thames Water Factfile (http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=393964&in_page _id=1770 - accessed on 04.07.06) 48 London Assembly Press Release (2006) Hit Thames Water Where it Hurts if Leakage Targets are not met 03.07.06 49 Thames Water Press Release (2006) Leakage Comes Down But More to Do 21.06.06 50 Thames Water Press Release (2006) Leakage Comes Down But More to Do 21.06.06 51 Daily Mail (04.07.06) Thames Water will not be fined over leaks (http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=393960&in_page _id=1770&ico=Homepage&icl=TabModule&icc=NEWS&ct=5 - accessed on 04.07.06) 52 Thames Water Press Release (2006) Leakage Comes Down But More to Do 21.06.06 53 OFWAT (2006) Thames Water Pays the Price for its Leakage Failures 04.07.06 54 Daily Mail (2006) Outrage as Thames Water Escapes Fine 04.07.06 55 House of Lords Debate on Water Supply: OFWAT 28.06.06 56 London Assembly Health and Public Services Committee (2006) Drought in London July 2006, p.3 57 Daily Mail (2006) Thames Water Attacked for £1.8m Ad 06.07.06
47 Thames Water has not met its leakage targets set down by OFWAT since 199958. OFWAT has increased the amount Thames Water is allowed to leak every day by an extra 7.7 million gallons above the current target.
Thames leakage (Mega litres per day)59 2000/01: 688 2001/02: 865 2002/03: 943 2003/04: 946 2004/05: 915 2005/06: 894 (Source: OFWAT)
Thames Water Leakage Reduction Targets (2006-10)60 2006/07: 840 Ml/day (instead of 805 million) 2007/08: 785 Ml/day (instead of 770 million) 2008/09: target remains at 745 million 2009/10: 720 Ml/day (instead of 725 million)
The long-term leakage (ELL) target for Thames Water = 28 per cent61
Against this background, Thames Water’s pre-tax profits soared by nearly one-third (31.5 per cent) to £346.5 million62. Meanwhile customers’ bills rose by 21 per cent (with the expectation that bills would increase 24 per cent over the next five years)63. The Consumer Council strongly recommends that the Thames Water situation is not allowed to be replicated here. Customers’ bills must not be allowed to rise to provide revenue for leakage investment while the company and shareholder face no burden of risk.
58 Daily Mail (2006) Outrage as Thames Water Escapes Fine 04.07.06 59 BBC News online (2006) Thames Water Facing Leak Penalty http://news.bbc.co.uk/1/hi/business/5143542.stm (accessed 04.07.06) 60 The Times (2006) Water Bosses Avoid Leak Fine by Agreeing to £150m Repairs (05.07.06) 61 London Assembly (2006) Hit Thames Water Where it Hurts if Leakage Targets Are Not Met 03.07.06 62 BBC News online (2006) Thames Water Facing Leak Penalty http://news.bbc.co.uk/1/hi/business/5143542.stm (accessed 04.07.06) 63 The Guardian (22.06.06) Profits Up, Price Up – And So Are the Excuses as Thames Water Fails to Plug the Leaks
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