WATER

OFWAT: Report on Leakage and Water Efficiency1998±1999

This report provides an interesting analysis ofleakage targets and results, as well asinformation about the water companies'initiatives to increase water efficiency fromthe customers. The report states that the targetset for the companies was an 8 per centreduction in leakage below their 1998±1999target (6 per cent below their actual perform-ance). The report states that at industry levelwater companies must reduce leaks from theirnetworks by a further 6 per cent below their1999±2000 target levels. The report stated thatthe amount of water lost from networks iscurrently 31 per cent below the peak levelreported in 1994±1995 and will continue tofall. The report states that in 1994±1995,companies reported that a total of 5,112megalitres per day were lost from theirnetworks. The targets for 2000±2001 will seethis reduced to 3,128 megalitres per day. Thismeant that leakage had fallen by 21 per centsince the setting of targets. The reportexamined those companies that had not metthe targets. In July, OFWAT reported that onlyBournemouth and West Hampshire had failedto meet its leakage target for 1998±1999 andhas been required to provide detailedquarterly reports on its progress to meet its1999±2000 target. However, OFWAT has sinceidentified a significant error in the data fromSouth-East Water, which suggests that thecompany has also failed to meet its 1998±1999target. Because of this, the DGWS haslaunched an investigation and will requireSouth-East Water to report every quarter onleakage reductions.

Companies report their (annual average)total leakage to OFWAT in their annual JulyReturns. This is certified by independentreporters, who are experienced engineerswho have access to the company's recordsand a duty of care to the Director General.

The DGWS sets the targets on the basis ofeconomics to ensure that the cost of reducingleakage is commensurate with the value of thewater saved: this is known as the EconomicLevels of Leakage (ELL). The report examineswhat is an economic level of leakage. The

reports states that the ELL is not fixed anddepends upon factors such as new techn-ology. The areas that have to be reported on inrelation to the ELL are: the methodologyused, the quality of the data, the breadth ofthe analysis, the robustness of the waterbalance and the consistency of approach.The data from the companies meant thatnine companies rather than six last year couldhave their targets based on their appraisals.The DGWS states that the companies havemore work to do and that companies arerequired to pay particular attention to: thequality of the data used in models, the use ofreal cost-benefit data in models, properidentification of the value of water, theenvironmental and social benefits of leakagecontrol. The report states that in the future,whilst OFWAT will continue to set targets inthe short term, OFWAT believe that incentivebased regulation works better than directintervention and that there should be suffi-cient incentives within the regulatory mech-anism for companies to manage leakageeffectively.

The report then goes on to look atmeasured and unmeasured household con-sumption and non-household consumption.Water supply is lost due to leakage but alsounbilled water is taken legally or illegallyand the water companies use some for opera-tional purposes. Metering now takes place in14 per cent of households, so the majority areunmeasured. This makes up the largestcomponent of the water companies' estimatesand if the companies overstate this com-ponent, the report states their leakage canappear better than it really is, and vice versa.On average, the per capita consumption perperson fell from 150 to 148 litres per personper day. OFWAT will challenge any com-pany's estimates that are too out of line withthis. Measured household consumption hasremained at a similar level from 1997±1998.However, the report states that there are widevariations in companies from year to yearand between companies; the greatest numberof metered households is in East Anglia(38 per cent of households). Non-household

Copyright # 2000 John Wiley & Sons, Ltd. 17

Util. Law Rev., 11(1) Jan±Feb 2000 Current Survey

consumption fell as a result of increasedmetering. The report states that, over thenext year, OFWAT will be looking at the scopefor future leakage reductions as part of a jointstudy with the Environment Agency, and theDepartment of Environment, Transport andthe Regions.

Since February 1996, companies have had aduty to promote the efficient use of water andthe report goes on to look at these issues ins. 4 and Appendix 1, which provides examplesof good practice. The report states that theDGWS has also welcomed the steps com-panies have taken to promote efficiency inwater use. He now believes that companiesshould focus on longer-term activities and hasset out an action plan that companies shouldhave completed by July 2000.

In 1997, the company submitted strategyplans for water efficiency. OFWAT uses fourcriteria to decide whether the companies arefulfilling their duty. The efficient promotionof water use should be complemented by:efficient pricing, the need for long termeducation, water efficiency activity mustmake economic sense in the context of thewater resource position and measures shouldbe promoted to those customers who willbenefit the most. The report states that thecompanies have made satisfactory progressand that companies should now focus onwater efficiency activities that are demon-strably cost effective.

The companies will, by July 2000, have toset out their plans, ensuring that: all customershave access to cistern water-saving devicesand the necessary advice to promote theirefficient use; to review existing water

companies' information plans and to set outa longer term programme for providingcustomers with water-saving advice, includ-ing self audit, over the following five years; aswell as promoting water efficiency in com-munity institutions; and companies whichhave a tight resource position will be requiredto report in July 2000 on their targets andindividual activities for promoting waterefficiency.

The rest of the report analyses the fourcriteria laid down by the DGWS, looking atsupply pipes and repair and replacement,metering and tariffs, public education andinformation to customers, and active pro-motional measures such as cistern devices,household audits, water-efficient new homes,monitoring and more detailed examples ofgood practice in Appendix 1.

Appendix 5 provides international compari-sons with Sydney Water and Water Corpora-tion Western Australia. Leakage levels werelower in the Australian companies than, inparticular, the water and sewerage companies,although Sydney Water's was higher than thewater only companies. The report states thatper capita consumption was much higher; thiscould be due to the climate, standard of livingor less efficient water use, the report states.

This is an interesting report that highlightshow important targets on leakage and anactive promotional plan on the part of OFWAThave helped to highlight water resources as animportant issue. While the DGWS does notlike direct intervention, it clearly has hadsome effect on this issue.

DEBBIE LEGGE

18 Copyright # 2000 John Wiley & Sons, Ltd.

Current Survey Util. Law Rev., 11(1) Jan±Feb 2000