southwestwater.co.uk bournemouthwater.co.uk South West Water Bournemouth Water Trading and Procurement Code Draft for Consultation July 2018 Contents_Toc518917010 1 Introduction .................................................................................................................................... 1 1.1 Purpose of the Code ............................................................................................................... 1 1.2 Use of the Code ....................................................................................................................... 1 1.3 Contact Details ........................................................................................................................ 1 2 Our position on water trading ........................................................................................................ 2 2.1 South West Water ................................................................................................................... 2 2.2 Our Regulators and Watchdogs .............................................................................................. 2 2.3 Water Resources ..................................................................................................................... 3 2.4 Water Trading ......................................................................................................................... 5 3 Principles of the code ...................................................................................................................... 6 3.1 Managing Imports ................................................................................................................... 6 3.2 Managing Exports ................................................................................................................... 7 3.3 Import and Export Principles .................................................................................................. 8 3.4 Additional principles ............................................................................................................. 13 4 Glossary of terms .......................................................................................................................... 14 5 Links to useful materials ............................................................................................................... 15 Version Date Draft for consultation July 2018 1 Introduction This is the South West Water Trading and Procurement Code (“Code”). This document has been written to set out the policies, principles and requirements that will apply when appointed water companies and third parties enter into water trading arrangements with South West Water. This code covers the three water resources zones (WRZ) in the south west peninsula and also the Bournemouth WRZ 1.1 Purpose of the Code Ofwat, the Water Services Regulation Authority, introduced water trading incentives at the 2014 price review (PR14) to encourage water trading. To protect customers and the environment, Ofwat requires that water companies who want to claim the incentives comply with an approved Trading and Procurement Code, demonstrating that all trades entered into are both economically and environmentally beneficial. Ofwat will assess new trades for compliance as part of the next price review (PR19), with incentives for qualifying trades being paid in the next period. Through publication of this code, we provide reassurance to potential market participants that we are willing to trade with any other water company and third party, provided that the trade is for economically and environmentally rational sources of water that will make a beneficial contribution to our/their water resources position. 1.2 Use of the Code South West Water will keep its Trading and Procurement Code up to date and publicly available, via its website. The approved code will also be available on the Ofwat website. This code should be read in conjunction with the South West Water Access Code, which sets out how licensed entrants to the industry can use the company’s public water supply system to supply water to a customer’s premises, through a supply of water introduced by the licensee into the supply system. The latest version of the Access Code is available on the South West Water website. 1.3 Contact Details Please direct any questions relating this code to - [email protected] 1 2 Our position on water trading This section provides an overview of South West Water, our main regulators, our water resources and an overview of our position on water trading. 2.1 South West Water South West Water provides regulated water and wastewater services to a population of 1.7 million across Devon, Cornwall and parts of Dorset and Somerset. From 1 April 2016, the trade and assets of Bournemouth Water were merged into South West Water Limited. Bournemouth Water’s licence as a water only undertaker under the Water Act 1991 was terminated and South West Water’s licence was modified to cover the Bournemouth Water area. South West Water Limited is therefore responsible for delivering services in both the original South West Water area of operation and the Bournemouth Water area of operation. 2.2 Our Regulators and Watchdogs South West Water operates under a number of statutory obligations including those detailed within the Water Industry Act, the Companies Act, the South West Water Licence, and the Competition Act. Since privatisation, there has been a strict system of regulation within the water industry, which is in place to safeguard the best interests of customers, other stakeholders, and the environment. South West Water has developed and established processes and procedures for ensuring obligations are adhered to in all material aspects. 2 Our main regulators are: Drinking Water Inspectorate (DWI): The DWI is responsible for setting and monitoring the high standards of drinking water quality that we supply. Environment Agency (EA): The EA is responsible for protecting and improving the environment. It controls all of the water we take from rivers, streams and underground sources and monitors the water we return to the environment. The Water Services Regulation Authority (Ofwat): Ofwat is the economic regulator for the water and sewerage industry in England and Wales. It regulates the price, investment, and service package that customers receive, as well as overseeing the sector’s competitive markets. Consumer Council for Water (CCW): CCW is a statutory consumer body for the water industry. It is responsible for representing all customers in England and Wales. 2.3 Water Resources We provide water and sewerage services over a region of nearly 4,300 square miles (11,137 square kilometres) of Devon, Cornwall and small parts of Dorset and Somerset. Over our region, we provide clean water to 97% of people, with 3% having private supplies, and take away used water from 88% of people, with 12% having private sewerage arrangements, like septic tanks. We divide our region of operation into four main strategic water resource zones (WRZs), each of which is a standalone area principally based on a large strategic reservoir: 1. Colliford Zone: This area largely supplies the Cornwall area. The main source of water is Colliford Reservoir on Bodmin Moor which works in conjunction with two former china clay pits and smaller reservoirs and river intakes across Cornwall 2. Roadford Zone: This area largely supplies North and South Devon. The main source of water is Roadford Reservoir, which works in conjunction with smaller reservoirs and river intakes in the area 3 3. Wimbleball Zone This area supplies East Devon, including Exeter. The main source of water is Wimbleball Reservoir on Exmoor, which works in conjunction with the River Exe and various groundwater sources across East Devon 4. Bournemouth Zone Sources of water in this area are dominated by direct run-of-river abstractions from the River Stour in Dorset and the River Avon in Hampshire with interconnectivity across the zone 4 A WRZ is defined as the largest possible zone in which all resources, including external transfers, can be shared. A WRZ is therefore a zone in which all customers experience the same level of service and the same risk of supply failure from a resource shortfall. To understand if a WRZ has sufficient water to meet customers’ needs, we set out a Water Resources Management Plan (WRMP). The WRMP details how we intend to maintain the balance between water supply and demand for the next 25 years. It sets out how we expect water supply and demand to change over time, what challenges this may give us and how we plan to solve them if they occur. The plan is refreshed every five years and published on our website. In all our WRZs, we do not expect a shortfall between supply and demand over the next 25 years even if no action is taken. As the future is uncertain we performed a number of tests to see how sensitive our supply-demand forecasts are to key risks or policy decisions. Some scenarios give rise to small supply-demand deficits in the medium to long-term, however as the deficits are both small and in the future there is sufficient time to act and mitigate the risk. Implementing the strategy set out in the WRMP ensures all our zones remain in surplus of the whole planning period with some additional headroom to manage future risks. 2.4 Water Trading We fully support water trading between companies where it is environmentally and economically rational to do so and