UK National Context Report - WaterTime.doc by suchufp

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									                                A research project supported by the European Commission
 FP5: Energy, Environment and Sustainable Development                                 www.watertime.org
  Key Action 4: City of Tomorrow and Cultural Heritage                              watertime@watertime.org
Thematic Priority 4.1.2: Improving the quality of urban life
             Contract No: EVK4-2002-0095




  D10m: WaterTime National Context Report - UK

                                          Robin de la Motte
                  Research Fellow, PSIRU, Business School, University of Greenwich
                                       r.delamotte@gre.ac.uk

                                                  31st January 2005




        One of 13 WaterTime National Context Reports on decision-making on water systems


                                  National Context Reports and case studies
                                 Estonia:      Tallinn
                                 Finland:      Tampere, Hämeenlinna
                                 France:       Grenoble
                                 Germany:      Berlin, Munich
                                 Hungary:      Budapest, Debrecen, Szeged
                                 Italy:        Arezzo, Bologna, Milan, Rome
                                 Lithuania:    Kaunas, Vilnius
                                 Netherlands: Rotterdam
                                 Poland:       Gdansk, Lodz, Warsaw
                                 Romania:      Bucharest, Timisoara
                                 Spain:        Cordoba, Madrid, Palma de
                                               Mallorca, Gran Canaria
                                 Sweden:       Stockholm
                                 UK:           Cardiff, Edinburgh, Leeds



                                              www.watertime.org




                                             WaterTime partners:
                            PSIRU, Business School, University of Greenwich, UK
                               ERL, Universidad Complutense de Madrid, Spain
            Institute of Environmental Engineering and Biotechnology (IEEB), Tampere, Finland
                                International Water Affairs, Hamburg, Germany
                                         Eötvös József College, Hungary

         Coordinator: PSIRU, Business School, University of Greenwich, Park Row, London SE10 9LS, U.K.
                                                                                                                                                  www.watertime.org


                                                                        Table of Contents
1       INTRODUCTION.................................................................................................................................................... 3
2       COUNTRY BACKGROUND ................................................................................................................................. 3
3       WATER RESOURCES AND USES ....................................................................................................................... 4
     3.1     WATER RESOURCES ........................................................................................................................................... 4
     3.2     WATER USES ...................................................................................................................................................... 4
        3.2.1 Public water supply ...................................................................................................................................... 4
        3.2.2 Water networks ............................................................................................................................................. 5
4       LEGAL FRAMEWORK ......................................................................................................................................... 6
     4.1     ENGLAND AND WALES ....................................................................................................................................... 6
        4.1.1 Water Resources Act 1973 ............................................................................................................................ 6
        4.1.2 Water Act 1983 ............................................................................................................................................. 6
        4.1.3 Water Act 1989 ............................................................................................................................................. 6
        4.1.4 Water Industry Act 1991 ............................................................................................................................... 7
        4.1.5 Water Industry Act 1999 ............................................................................................................................... 7
        4.1.6 Water Act 2003 ............................................................................................................................................. 7
     4.2     SCOTLAND ......................................................................................................................................................... 8
        4.2.1 The Water (Scotland) Act 1980 ..................................................................................................................... 8
        4.2.2 Water Industry (Scotland) Act 2002.............................................................................................................. 8
        4.2.3 Water Environment and Water Services (Scotland) Act 2003 ...................................................................... 8
     4.3     NORTHERN IRELAND .......................................................................................................................................... 9
5       INSTITUTIONAL FRAMEWORK ..................................................................................................................... 10
     5.1     ENGLAND AND WALES ..................................................................................................................................... 10
        5.1.1 Water Companies ........................................................................................................................................ 10
        5.1.2 Secretary of State of the Department of Environment................................................................................. 13
        5.1.3 Ofwat (Office of Water Services) / Water Services Regulation Authority ................................................... 13
        5.1.4 Environment Agency ................................................................................................................................... 13
        5.1.5 WaterVoice / Consumer Council for Water ................................................................................................ 15
        5.1.6 Other institutions ........................................................................................................................................ 15
     5.2     SCOTLAND AND NORTHERN IRELAND .............................................................................................................. 16
        5.2.1 Scotland ...................................................................................................................................................... 16
        5.2.2 Northern Ireland ......................................................................................................................................... 17
6       FINANCING, WATER RATES AND SEWERAGE CHARGES ..................................................................... 18
     6.1     ENGLAND AND WALES ..................................................................................................................................... 18
        6.1.1 Tariff system ................................................................................................................................................ 18
        6.1.2 Price setting ................................................................................................................................................ 19
        6.1.3 Price differential between regions .............................................................................................................. 19
     6.2     SCOTLAND AND NORTHERN IRELAND .............................................................................................................. 21
7       SPECIFIC FACTORS IN THE NATIONAL CONTEXT ................................................................................. 22
     7.1         UK CONSTITUTIONAL SYSTEM ......................................................................................................................... 22
     7.2         CONSERVATIVE POLITICAL PHILOSOPHY OF THE 1980S.................................................................................... 22
8       RELEVANT ACTORS, ROLES AND CHARACTERISTICS ......................................................................... 23
     8.1         INSTITUTIONAL ACTORS, 2004 ......................................................................................................................... 23
     8.2         OTHER ACTORS ................................................................................................................................................ 23
9       PARTICIPATION ................................................................................................................................................. 25
     9.1         UK POLITICAL STRUCTURE AND CULTURE ....................................................................................................... 25
     9.2         PARTICIPATION IN THE UK WATER SECTOR ..................................................................................................... 25
     9.3         CONSUMERS‟ REPRESENTATION ....................................................................................................................... 26
     9.4         WORKERS‟ REPRESENTATION .......................................................................................................................... 27
10           BIBLIOGRAPHY .............................................................................................................................................. 27
11           WEBSITES ........................................................................................................................................................ 28

1
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1 Introduction
The national context report covers the national policies of European governments which affect the decision-
making process in water, including economic restrictions and identifying the common context of
developments within which decisions have been taken about water. These will include for example changes
in government policies, in industry structures, and, in the case of the accession countries, the complete
restructuring of government systems. The national context is closely related to the international and EU
context.

The decisions analysed in Watertime are those that are taken and implemented at local level. The water and
sewerage services are typically tied to geographical location in a way that most other goods and services are
not. Because of this, historically most of the key decisions have been and continue to be made in the future
by authorities governing relatively small geographical areas – towns, cities, and municipalities or regions.

These local decisions are, however, made in the national and international context. Local actors may take
into account local factors, but they may be constrained by, for example, national legal systems and
international economic conditions. This national context report examines how national-specific factors
impact on the city or cities studied constraining the decision-making at city level.




2 Country Background

                                      The United Kingdom is made up of England, Wales, Scotland and
                                      Northern Ireland, with more than 80% of the population in England
                                      (Scotland 9%, Wales 5%, Northern Ireland 3%). The UK has a long
                                      history as a major player in international affairs and fulfils an
                                      important role in the EU, UN and NATO.

                                     The economy - one of the largest in the world - is no longer
                                     manufacturing but services-based, with e-commerce of growing
                                     significance. The City of London is a global financial centre. Many of
                                     the country's people have never been richer, but a recent international
study says the UK has the second highest child poverty rate in the European Union.

The country has not yet adopted the euro currency and the debate continues over when, and indeed whether,
it will do so. The government has said that a series of economic criteria must be met before a referendum on
the issue is held. In recent years the United Kingdom has made significant moves on devolution of powers to
Scotland and Wales. The Scottish Parliament in Edinburgh and the National Assembly for Wales in Cardiff
opened in 1999, and the possibility of devolution for the English regions has also been discussed. 1

 Location:                    Northwestern Europe
 Area:
          total:              244,820 sq km
          land:               241,590 sq km
         water:               3,230 sq km
 Population                   60,094,648 (July 2003 est.)
 Population growth rate       0.3% (2003 est.)
 Population density           240 (people/sq km of land) [340 in England and Wales alone]2
 Life expectancy              76 years (men), 81 years (women)
                                                                        Source: CIA World Factbook 20033



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3 Water Resources and Uses
3.1 Water resources
The UK has a temperate climate, with average rainfall of 1100 mm/year.
Rainfall variation is relatively low month to month, but quite high
regionally, as rain typically comes in from the Atlantic and is progressively
deposited on its eastward journey across the UK. As a result, the eastern
parts of the UK are drier, with easternmost subregion East Anglia receiving
only 601.1mm. Scotland and Wales average 1400 mm or more, with the
average again disguising an east-west gradient.*This geographic variation
in precipitation unfortunately reinforces the variation in demand, with the
south-east having a much higher population density than other regions.
However, although rising demand in the drier regions can lead to
difficulties in dry years, these can usually be dealt with without dramatic
problems, with the assistance of tools such as hosepipe bans. Overall, only
around 20% of groundwater (c. 2bn m3) and less than 10% of surface water
(c. 12 bn m3) is used for water supply.4 Groundwater is of particular
importance in eastern England and parts of the Midlands, where many
authorities depend entirely on groundwater.5

In European terms, the UK‟s rivers are small, with the Trent, the largest
                                                                                Average rainfall (1961-1990, mm/year):
river in England at 345 km long, having a mean flow of 93 cumees. Most             England               827.3
of the UK‟s rivers are low energy lowland rivers, although there are high          Wales                 1397.5
energy rivers and streams (which can flood quickly) in upland areas.               Scotland              1470.6
Only 10% of England is at risk of flooding from rivers (around 1.8m                Northern Ireland      1098.3
homes); a greater proportion is at risk from the seas.6                            UK                    1099.6


3.2 Water uses

The table right indicates that agriculture uses relatively little   Water use in England & Wales, 1999
water (less than 1% of total water use), because irrigation is      Water use            Quantity                 %
not normally needed. However this understates agriculture‟s                              (m litres/day)
impact, because the type of agriculture that uses                   Electricity supply   26515                    49.0
supplementary irrigation (to raise quality or counter dry           Public water supply 16255                     30.0
periods in summer) is concentrated in the drier eastern parts       Industry             5428                     10.0
of England, thereby contributing disproportionately to water        Fishing              4867                     9.0
scarcity. Another key factor in scarcity, leakage, is estimated     Private water supply 526                      0.97
for 2000-1 at 21.6%, of which three quarters is in the water        for household use
companies‟ network, and a quarter on the property of end            Agriculture          467                      0.86
users.7                                                             Other                91                       0.17
                                                                    TOTAL                54148                    100
                                                                                 Source: Schönbäck et al (2003: 160)
3.2.1     Public water supply

Population receiving water and sewerage services in England and Wales, 2001-02
                       Water                                         Sewerage
                       Unmeasured              Metered supplies      Unmeasured               Metered supplies
                       supplies                                      supplies

*
 UK Meteorological Office website, accessed March 2004. Averages are for 1961-1990, the World Meteorological
Organization standard; 1971-2000 averages are marginally higher.
http://www.met-office.gov.uk/climate/uk/averages/19611990/


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WaSC total            34,434,000               8,765,000               40,414,000             10,919,000
WoC total             7,866,000                1,933,000               N/A                    N/A
Industry total        42,300,000               10,698,000              40,414,000             10,919,000
Company estimates of population served. Totals may not add up due to rounding. Source: Ofwat8


Company estimates of unmeasured household water consumption in England and Wales
                         1995-96       1996-97        1997-98       1998-99       1999-2000      2000-01

WaSC average           149          145            147            145           148            149
WoC average            171          163            160            159           161            161
Industry average       154          149            150            148           151            152
Company estimates of unmeasured household consumption, excluding underground supply pipe leakage, in l/head/day.
Metered household consumption averages around 20 litres/head/day lower. Averages are weighted by population of
unmeasured households. Source: Ofwat9



3.2.2     Water networks
                                   England10     Northern Ireland11       Scotland12       Wales13 (Welsh Water)
Water
Population supplied14              49,450,000*   1,686,000                5,008,000        2,855,000
water supplied (m litres/day)                                                              900
impounding reservoirs                            48                                        84
major water treatment works                      47
water treatment works              1507*                                  441              106
service reservoirs                 4645**        490                      1127
water pumping stations             5678*         270                                       620
kilometres of water mains15        298,200*      25,000                                    26,800

Wastewater
Population supplied16             48,039,000* 1,400,000                   4,867,000        2,954,000
wastewater treatment works        5434*           918                     643              850
wastewater pumping stations       16566*          760                                      1,650
kilometres of sewers17            284,200*        13,000                                   17,600
% connected to public                             83%
sewerage network
% sewage treated biologically                                                              97%
* England and Wales figure, minus Welsh Water. The extent of the water companies‟ territories means the result does
not precisely match England but is a useful approximation. ** England and Wales figure




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4 Legal Framework
4.1 England and Wales
4.1.1 Water Resources Act 1973
Water and sanitation remained a largely municipal service in England and Wales until 1974, as in the rest of
Europe, having been largely municipalized in the half-century preceding the First World War. In 1973,
twenty-eight private companies remained, supplying water to 25% of the population, which were excluded
from the 1974 restructuring.18

These private companies aside, the 1973 Water Act restructured virtually the entire water industry in
England and Wales. It created 10 Regional Water Authorities (RWAs), based on river basins, which took
over the work previously carried out by 157 water undertakings, 29 River Authorities and 1393 Sanitary
Authorities.19 The difficulties associated with implementing this effectively meant that as late as 1982, 95%
of sewerage work was still handled by district councils under agency arrangements with the RWAs. Only the
Water Act 1983 gave the RWAs the right to terminate these arrangements and assume full control.20

Most of the members of the RWAs were appointed by local authorities, but the chair and some other
representatives were appointed by the government, which provided all capital finance. There was no separate
consumer representation, but the RWAs remained accountable to local councils through their appointees; the
public could attend meetings of RWAs; and consumers could also make complaints to the Local
Ombudsman – a body created at the same time, with the power to investigate complaints against the RWAs
as well as local councils.

4.1.2 Water Act 1983
In 1983 the RWAs were effectively brought under the control of central government. The membership of the
RWAs was significantly reduced, and all appointments were now made by the government. 21 The public lost
the right to attend the meetings of the RWAs. Instead, consumer consultative committees (CCCs) were
created in each region, the members of which were all appointed by the RWAs.22 CCCs were mainly
concerned with service charges, standards of service and the monitoring of complaints presented to the
authority. By the time the industry was privatised the water sector had already been transformed from a local
government based service into one run by national government.

4.1.3 Water Act 1989
In 1989, the RWAs were sold by issuing shares on the stock market, with special discounts being offered to
the public to ensure political success. Under the Water Act 1989,23 the newly-floated water-and-sewerage
companies (WaSCs) became owners of the entire water infrastructure and properties of the RWAs. The Act
gave them 25-year concessions for sanitation and water supply, protected against any possibility of
competition.24 The concessions covered the whole of England and Wales, with the exception that 25% of the
population continued to have their water (but not sewerage) supplied by the existing small private
companies, now known as water-only companies or WoCs.*

Concessions may be terminated by the government,25 but only by giving 25 years‟ notice (extended from 10
years in 2002). EU procurement directives do not currently require competitive tendering of concessions, but
there was a recent court ruling that prevented transfer of an operating concession without allowing
competing bids, when Welsh Water was restructured.26 In the UK, the Utilities Contracts Regulations 1996,
which implement EC directives on public procurement, govern procurement in the water and other utility
industries. Ofwat monitors companies‟ use of associates for subcontracting, such as for construction and
maintenance work.

*
 Previously the “statutory water companies”, they were incorporated into the present legal scheme via the Statutory
Water Companies Act 1991. http://www.hmso.gov.uk/acts/acts1991/Ukpga_19910058_en_3.htm


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4.1.4 Water Industry Act 1991
A general framework for competition was set out in the Water Industry Act 199127 and extended by the
Competition Act 1998. Ofwat describes four main ways at present to achieve competition:

       inset appointments28 – small-scale changes to monopoly areas, whereby the existing supplier is
        replaced by another, for a specific site of a user of more than 100 megalitres of water per year;
       cross-border supplies – where customers can get connections from another company, but must
        finance the cost of that connection
       unregulated supplies – a few exist and consumers can buy supplies from them; and
       common carriage – when one service provider shares the use of another‟s assets, such as its pipe
        network or treatment works. The Competition Act 1998 increased the scope for this, and OFWAT
        hopes that in theory consumers may be able to choose suppliers, analogous to the situation in
        electricity and gas.29

The Water Industry Act 199130 requires the Secretary of State to refer a merger between the companies to the
Competition Commission if the gross assets of each of the water enterprises to be merged exceed £30
million. EC Mergers Regulations apply if the combined aggregate turnover of all the undertakings concerned
is more than € 5,000 million.31 Proposals for other changes, such as in ownership structure, have to be
referred to Ofwat, which has to consider consumer benefits, efficiency, and environmental duties.32

Ofwat can seek court orders to require performance of a duty, if it feels it necessary, and if the company does
not comply, can ask the court to appoint a special administrator.33

4.1.5 Water Industry Act 1999
Under the Water Industry Act 1999,34 water companies may not disconnect consumers for non-payment. Pre-
payment meters are also outlawed.

4.1.6 Water Act 2003
Competition: common carriage
A major change under the 2003 Act35 36– at least on paper – is the introduction of a competition regime with
provisions for common carriage (third-party suppliers providing water through existing networks) from
autumn 2005. Customers using more than 50 megalitres a year are to have the option of switching to another
supplier, with the service possibly being provided over the existing network. Previously, new suppliers had
to build new infrastructure (pipes or boreholes) to supply the new customer. The 50 megalitre threshold is a
decrease from the previous one of 100 megalitres in England and 250 in Wales, under which just 9
companies had switched supplier since privatization.37 In early 2004 there was still confusion over how the
new common carriage system would work, with some relevant parts of the Act criticised as vague, notably
the provision that new entrants have to reimburse existing water companies in respect of – in the words of
the Act – „some or all' of the expenses incurred. Some industry experts have questioned the value of the new
competition regime over and above what was already on offer from the inset appointment regime.38 A sign
that the new regime may not lead to an explosion of competition is that Enviro-Logic, a leader in attempting
to persuade companies to switch suppliers under the inset system, was taken over in 2003 by its previous
part-owner, the Pennon Group, with a view to possibly closing it down.39

Water abstraction licensing
Another key provision of the 2003 Act is the introduction of a new system of water abstraction licensing,
which is linked to local water resource availability. The abstraction licensing scheme shifts from one based
on purpose of use to one based on volume consumed. Licences will be time-limited, and the Environment
Agency may revoke licences without compensation if they have not been used for four years. A threshold of
20 cubic metres a day (which may be modified according to local water resource availability) excludes
small-scale abstractors from the need to acquire a licence.40



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New regulatory structure
The Water Act 2003 also changed Ofwat's structure, replacing a single Director General of Water Services
with a new regulatory authority („Water Services Regulation Authority‟) with a board structure. Ofwat had in
anticipation already moved in this direction by appointing a board that included independent non-executive
advisory directors. Similarly, Ofwat said that it had anticipated the setting up of an independent Consumer
Council for Water by treating the existing consumer body, WaterVoice “as an independent consumer
representative whose views may well differ at times from our own”.41 The new bodies will not come into
existence until after April 2005, to allow Ofwat time to complete its current price review undisturbed.

New powers
Under the 2003 Act, Ofwat has new powers to fine water companies up to 10% of their turnover in cases of
severe breaches of customer service standards, legal obligations, or licence conditions. The new provisions,
expected to take effect in 2005, bring Ofwat's powers into line with those already operated by regulators of
other network industries.42

The Act also included controversial new powers for Health Authorities to force water companies to
fluoridate their water supply.


4.2 Scotland
4.2.1 The Water (Scotland) Act 1980
The 1980 Act makes provisions for ensuring that water supplied for domestic purposes is fit for human
consumption, with Scottish Ministers responsible for enforcement. The Act also requires local authorities to
keep themselves informed about the wholesomeness of public and private water supplies in their area and
notify the water authority if not satisfied, as well as secure improvements to private water supplies if they
consider them necessary.

4.2.2 Water Industry (Scotland) Act 2002
The current legal framework in Scotland is set out in the Water Industry (Scotland) Act 2002.43 Many of the
provisions of this Act update those contained in the Water Industry Act (1999) and the Local Government etc
(Scotland) Act 1994. The latter had transferred responsibility for water and wastewater services from the
regional and islands councils to three public water authorities.

Among other changes, the 2002 Act created Scottish Water by merging the existing three public water
authorities, and created an independent water quality regulator. Section 7 of the 2002 Act placed the
functions of the Regulator on a statutory footing by creating the post of Drinking Water Quality Regulator
for Scotland (DWQR), responsible for enforcing the Water Supply (Water Quality)(Scotland) Regulations
2001.

Sections 29 to 40 of the 2002 Act deal with charging arrangements. In general terms the legislation gives
Scottish Water considerable discretion in developing and applying charging policy, subject to the revenue
cap intimated by the Scottish Ministers.44

4.2.3 Water Environment and Water Services (Scotland) Act 2003
The Water Environment and Water Services (Scotland) Act 200345 is the enabling legislation for the Water
Framework Directive. It identifies the Scottish Environmental Protection Agency, SEPA, as the competent
authority.

The main groundwater objectives of the Act are to:

         Prevent deterioration of the status of groundwater bodies;



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        Protect, enhance and restore all bodies of groundwater with the aim of achieving good groundwater
         status by 2015;
        Prevent or limit the input of pollutants to groundwater and reverse any significant and sustained
         upward trends in the concentration of pollutants in groundwater;
        Achieve compliance with any relevant standards and objectives for protected areas.


4.3 Northern Ireland
The Water (Northern Ireland) Order 199946 gave the Environment and Heritage Service (EHS), an agency
within the Department of the Environment (DOE), the duty to promote the conservation of the water
resources of Northern Ireland and the cleanliness of water in waterways and underground strata. The Water
Order repealed and re-enacted with amendments the Water Act (Northern Ireland) 1972. The EHS carries out
this work, which parallels some of the activities (in England and Wales) of the Environment Agency,
through its Water Management Unit.

The Water Environment (Water Framework Directive) Regulations (Northern Ireland) 200347 implemented
the Water Framework Directive.




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5 Institutional Framework
5.1 England and Wales

5.1.1 Water Companies
Water companies in England and Wales come in two flavours – Water and Sewerage Companies (WaSCs)
and Water Only Companies (WoCs). WaSCs are the result of the 1989 privatization by asset-sale of the
previous Regional Water Authorities, whilst the WoCs are private companies which have existed since the
nineteenth century and have never been municipalized. All have an effective monopoly of public water
supply in their area of operation.

Each water company has the statutory duty to develop and maintain an efficient and economical system for
water supply in its area. Water companies are responsible for:

         providing a clean and reliable supply of water;
         water resources plans, submitted to the Environment Agency, setting out each company‟s view of
          how it will manage water resources over the next 25 years. These are reviewed annually;
         drought plans, setting out responses to different types of drought;
         proposing and justifying water resources schemes for incorporation into Ofwat‟s periodic reviews of
          water charges;
         promoting the efficient use of water on behalf of customers;48 and
         maintaining an economical and efficient supply system.49

In regard to sewerage, charges made by companies for sewerage services cover three main services:50

         collection and treatment of surface water drainage (run-off from rainwater that falls on to customers‟
          properties)
         collection and treatment of highway drainage (run-off from roads and pavements)
         collection and treatment of foul sewage and trade effluent.

Ownership
The 10 WaSCs were protected from takeover for 5 years by the government‟s „golden share‟; since then, half
of the WaSCs have been taken over, although no mergers between them have been permitted. The number of
WoCs has fallen from 29 in 1989 to 13 in early 2004, mostly due to mergers between WoCs, and the
remainder due to takeovers by WaSCs.51 Takeovers in the 1990s were dominated by the French water
multinationals (Veolia, Suez, SAUR), as well as by energy companies wishing to expand into water (eg
Enron, Scottish Power, RWE). However, since 2000 water multinationals and energy companies have to
some extent withdrawn, with Welsh Water being mutualized, greater involvement of banks, and several other
companies wholly or partially floated on the stock market.

Regulatory concerns about competition have to some extent limited the concentration of the industry, for
example preventing Veolia‟s attempt in 2002 to take over Southern Water. A recent (2004) report52
indicating that the larger companies suffer from diseconomies of scale is likely to further increase regulatory
opposition to more concentration.




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     Company ownership, May 2004
    Company                     %              Parent Group                     Country
    Water and Sewerage Companies (10)
    Anglian Water               100            Anglian Water                    UK
    Northumbrian Water          25             Suez-Lyonnaise                   France
                                75             Northumbrian Services            UK
    North West Water            100            United Utilities                 UK
    Severn Trent Water          100            Severn Trent                     UK
    Southern Water              80.1           Royal Bank of Scotland           UK (Scotland)
                                19.9           Veolia                           France
    South West Water            100            Pennon Group                     UK
    Thames Water                100            RWE                              Germany
    Welsh Water                 100            Glas Cymru*                      UK (Wales)
    Wessex Water                100            YTL                              Malaysia
    Yorkshire Water             100            Kelda                            UK

    Water only Companies (13)
    Bournemouth and West                 50    Biwater                          UK
    Hampshire Water                      50    Nuon                             Netherlands
    Bristol Water                        100   Bristol Water                    UK
    Cambridge Water                      100   Cheung Kong                      Hong Kong
                                               Infrastructure
    Cholderton & District Water          100   Cholderton Water                 UK
    Dee Valley                           100   Dee Valley                       UK
    Folkestone and Dover                 100   Veolia                           France
    Mid Kent Water                       100   Swan Group                       UK
    Portsmouth Water                     100   South Downs Capital              UK
    South East Water                     100   Macquarie Bank                   Australia
    South Staffordshire Water            100   South Staffordshire              UK
    Sutton & East Surrey Water           100   East Surrey Holdings             UK
    Tendring Hundred                     100   Veolia                           France
    Three Valleys                        100   Veolia                           France
     Company floated on London Stock Exchange; * Company Limited by Guarantee




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                                                                       , 2004




http://www.competition-commission.org.uk/rep_pub/reports/2002/fulltext/472a3.1.pdf



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5.1.2 Secretary of State of the Department of Environment
The Department of Environment (now Department for Environment, Food, and Rural Affairs, DEFRA), has
ultimate responsibility for all aspects of water policy in England, including water supply and resources, and
the regulatory systems for the water environment and the water industry.53 The Secretary of State issues
licences to the water companies, appoints the Director General of Water Services and selects individuals to
serve on the Environment Agency. DEFRA also determines standards for water supply and sewage business
and enforces prosecution for violation. The Secretary of State has the highest office in the water industry and
may give orders to the Chief Inspector of the DWI, the EA and to the Director General of Water Services.
The Secretary of State is the overall quality regulator, sharing that duty with the EA and the DWI.

5.1.3 Ofwat (Office of Water Services) / Water Services Regulation Authority
Ofwat
Economic regulation of the water companies of England and Wales is as of 2004 carried out by the Director
General of Water Services through his Office of Water Services (Ofwat). The Director General reviews
water company prices to customers in his five-yearly price review (see Ofwat, 1999a). Water companies
produce plans showing how they intend to manage and develop their supply systems. The Director General
determines prices to customers so that companies have sufficient income to carry out the parts of these plans
that he considers to be justified. As there is no competition between the companies, OFWAT compares the
companies‟ performance with each other. OFWAT‟s regulatory mechanism is by price-cap, carried out every
5 years according to a formula RPI + k. RPI represents general retail price inflation, and k adjusts this by
reference to performance standards, efficiency and service and levels.54

The Director's Primary duties are to ensure that:

      “companies are able to finance their functions, in particular by securing a reasonable rate of
      return on their capital. Lenders and shareholders should be able to receive a return that is
      sufficient, but no more than sufficient, to induce them to make loans and hold shares, if the
      company operates efficiently”.

OFWAT is responsible for enforcing the duty which has been imposed on companies since 1996, to promote
the efficient use of water by all their customers. Companies are expected to have an efficient pricing
framework, providing measured customers with appropriate incentives to use water wisely, and a long-term
education programme to sustain customer awareness. The extent to which the companies permit sewerage
flooding incidents, are in breach of bathing water standards, or involved in pollution incidents, is also
monitored by OFWAT.

Water Services Regulation Authority
The Water Act 2003 changed Ofwat's structure, replacing a single Director General of Water Services with a
new regulatory authority („Water Services Regulation Authority‟) with a board structure. Ofwat had in
anticipation already moved in this direction by appointing a board that included independent non-executive
advisory directors. The new body will not come into existence for some time, to allow Ofwat time to
complete its price review work undisturbed; the target date at time of writing is April 2006.55


5.1.4 Environment Agency
The Environment Agency (EA) was created in 1996, replacing the National Rivers Authority (NRA), which
had been set up in 1989. In addition to the environmental regulation responsibilities already held by the NRA
(in water management), the EA acquired two main additional areas of responsibility, air pollution and solid
waste disposal, which had previously been the responsibility of central government and local government
respectively.

The EA has the duty to conserve, augment, redistribute and secure the proper use of water resources in
England and Wales. It is the central body with responsibility for long-term water resources planning in
England and Wales. The EA has a duty to manage the water resources of England and Wales as laid down in


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the Water Resources Act 1963. The principles behind the Act support the concept of sustainability and
require the Agency to consider the reasonable need for an abstraction in the light of any impact it may have
on the environment or the rights of other water users. The EA licenses the impoundment and abstraction of
water under the Water Resources Act 1991. The Water Resources Act 1991 (as amended by the Environment
Act 1995) makes it an offence to discharge sewage or trade effluent to surface or groundwater except with a
consent from the Environment Agency. Other relevant responsibilities of the Agency include:

               flood defence on main rivers;
               water quality;
               waste minimisation in certain regulated industries (including the minimisation of the waste
                of water);
               fisheries; and
               navigation on some rivers.56

The Environment Agency is responsible for maintaining or improving the quality of fresh, marine, surface
and underground water in England and Wales. It aims to prevent or reduce the risk of water pollution
wherever possible, and to ensure that it gets cleaned up if pollution occurs that might lead to effects on
ecosystems or people.57 The EA regulates discharges to „controlled waters‟ through determination of
applications for and issue of discharge consents. It monitors „significant‟ discharges to assess compliance
with consent limits, as well as monitoring waters that receive effluent discharges to assess compliance with
water quality targets. The EA recovers the costs of regulating discharges through its „Application and
discharge to controlled waters charging scheme‟.

Companies‟ water abstractions and effluent discharges are regulated by the Environment Agency. The
Agency is under a duty to have regard to their water supply and sewerage services duties when it exercises
its powers. Each water company has the statutory duty to develop and maintain an efficient and economical
system for water supply in its area, and the Agency‟s duties in respect of water resources management do not
relieve the companies of that obligation.58 The EA can take legal action against a company, for example for
breach of permit conditions or for causing a pollution incident. The fines imposed on companies are set by
the courts.

A National Environmental programme has been agreed between the government, the EA and the water
companies, which sets out more than 600 improvements which companies are expected to meet as a
condition of their permits. The programme expects to achieve the targets for river water quality where the
existing failures are caused by the water companies, and also to get closer to EC standards e.g. by 2005
ninety seven per cent of waters will consistently meet the Imperative Standards in the Bathing Water. The
investment programmes for each water company specify the conditions imposed by the EA for abstractions
of water and discharges of treated sewage, and set dates by which projects must be completed. The
programmes form part of the basis on which price limits are set by OFWAT.

Instruments
     The EA publishes guidance on surface water disposal which describes „control at source‟ options for
       treatment and „end of pipe‟ systems, such as swales and constructed wetlands. These techniques are
       collectively known as “Sustainable Urban Drainage Systems” (SUDS).
     The EA defines Source Protection Zones (SPZ) for nearly 2000 groundwater sources (wells,
       boreholes and springs) used for public drinking water supply. The SPZ provide an indication of the
       risk to groundwater supplies that may result from potentially polluting activities. Water protection
       areas currently cover 8 per cent of land, and sensitive areas under the urban waste water treatment
       directive cover 6 per cent of river length.59
     The EA reports to Ofwat annually on the environmental performance of the water industry60. These
       tables track a number of indicators: Consent compliance; Legal action; Pollution incidents; Progress
       of water quality schemes; Bathing water compliance.
     Abstraction permits are allocated within the framework of the Catchment Abstraction Management
       Strategy process (CAMS). CAMS makes more information on water resources allocation publicly



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          available and allows the balance between the needs of abstractors and those of the aquatic
          environment to be determined in consultation with local interested parties. All new and varied
          abstraction licences are issued with a time limit. CAMS is the vehicle for reviewing time-limited
          licences, determining whether they should be renewed and, if so, on what terms.61
         Current abstraction charges in England and Wales are set to cover in total the Environment Agency's
          water resource management costs. They are based on licensed quantities and vary according to
          simple geographical, seasonal and net abstraction factors. Current data is not adequate to support the
          derivation of charges based on the monetary valuation of the environmental benefit of in-stream
          flows, i.e. the benefit from not abstracting.

5.1.5 WaterVoice / Consumer Council for Water
WaterVoice
The current (2004) consumers‟ representative body is WaterVoice, which developed from the regional
Customer Service Committees (CSCs), one for each water-and-sewerage company, which were created at
privatisation as an integral part of the structure of OFWAT itself. 62 OFWAT created a national non-statutory
body, the Ofwat National Customer Council (ONCC), consisting of the chairs of the 10 CSCs.63 In 2002 the
body renamed itself „WaterVoice‟, with the ONCC known as the WaterVoice Council and the CSCs known
as WaterVoice Committees.

The committees‟ statutory duties are to represent the interests of all customers and investigating and
monitoring complaints about the water companies. The committees are appointed by, staffed by, and
financed through OFWAT. The chairpersons are appointed by the Director-General of OFWAT, and then the
chair appoints the other members of the committee. Staff are OFWAT employees, and WaterVoice‟s budget
comes from Ofwat. WaterVoice reports annually to the Director-General of OFWAT.

Consumer Council for Water
The Water Act 2003 set up a Consumer Council for Water, replacing WaterVoice – although the change will
not come into effect until October 2005,64 to allow the current price review to be concluded without
disruption. The Consumer Council will be closer to the model employed in the other network industries.
Slight changes to WaterVoice‟s regional structure are envisaged, with nine regional committees in England
reduced to six, by merger.65 Ofwat said that it had anticipated the setting up of by treating the existing
consumer body, WaterVoice “as an independent consumer representative whose views may well differ at
times from our own”.66


5.1.6 Other institutions
UK Government and National Assembly for Wales
In England, the Secretary of State for the Environment, Transport and the Regions determines drought orders
and deals with appeals against the Agency‟s abstraction licensing decisions. The National Assembly for
Wales has statutory and policy responsibility for matters related to the water industry in Wales, although
there are special powers for the Secretary of State to intervene in matters concerning the cross-border rivers –
the Severn, the Dee and the Wye.67

Drinking Water Inspectorate (DWI)
The DWI is part of DEFRA, the Department of Environment, Food and Rural Affairs. Since 1990, the DWI
is responsible for assessing the quality of drinking water68 in England and Wales, taking enforcement action
if standards are not being met, and appropriate action when water is unfit for human consumption. Its main
job is to check that the water companies in England and Wales supply water that is safe to drink and meets
the standards set in the Water Quality Regulations*. It also investigates complaints from consumers and
incidents which affect or could affect drinking water quality. Its investigations of incidents can lead to water
companies being prosecuted.69

*
 The DWI enforces Regulation 25 of the Water Act 1989 amended by the Water Industry Act 1991, and the Water
Supply (Water Quality) (Amendment) Regulations 1991.


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Competition Commission
The Competition Commission was established by the 1998 Competition Act to replace the Monopolies and
Mergers Commission. Water companies may be referred by the regulator to the Commission if they are
considered to be operating in a manner that is against the public interest, or if certain financial criteria
regarding the size of the merging companies are met. The Commission then investigates, reports, and can
make recommendations on whether to allow the merger to proceed, and apply conditions if it deems them
necessary.

Planning and local authorities
Strategic planning authorities and local authorities are responsible for the land use planning framework and
planning decisions. Local authorities also regulate the quality of private drinking water supplies through their
environmental health duties.



5.2 Scotland and Northern Ireland
5.2.1 Scotland
Scottish law and institutional arrangements usually differ from those in England and Wales. Scotland was
not included in the 1974 restructuring of municipal enterprises into Regional Water Authorities, partly
because its water policy was directed by the Scottish Office rather than the Department of the Environment.
As a result, in Scotland water and waste water services remained the responsibility of local government until
31 March 1996. The failure to include Scotland in the 1989 privatization can be considered partly due to the
additional institutional obstacle of continuing municipal ownership, together with the relative electoral
weakness of the Conservative government in Scotland.70

1996 restructuring
In 1996 the UK government carried out a restructuring of the industry along the lines of the 1974 reform in
England and Wales, although this time with the clear intention of introducing private capital through the
Private Finance Initiative71 (e.g. build-own-operate arrangements for wastewater treatment plants). Three
regional water authorities were created72 as public corporations under the Secretary of State for Scotland
(before devolution of powers to a Scottish Parliament), who was responsible for the efficiency of the
industry. At the same time a Scottish Water and Sewerage Customers Council (known as the Customers
Council) was created. This was a national body with three area committees corresponding to the water
authorities, financed by a levy on the three water authorities, with the role of representing consumer interests
and handling complaints. It was also, surprisingly, given the role of approving the tariff proposals of the
water authorities.73 In addition, the Environment Act 1995 set up the Scottish Environment Protection
Agency, which became operational on 1 April 1996.

1999 structuring
However, following a review, this regulatory structure was completely changed in 1999, more closing
matching the regulatory structure in England and Wales. The Customer Council was abolished, to be
replaced by a new industry regulator with a similar role to Ofwat. The Water Industry Commissioner for
Scotland took over both the tariff approval responsibilities formerly held by the Council, and the
responsibility for industry efficiency previously held by the Scottish executive. It also took on the
responsibility for investigating customer complaints. At the same time, a Water Industry Consultative
Committee was created for each of the three water and sewerage authorities, to advise the Commissioner on
the promotion of consumer interests. The WICCs are all chaired by the Commissioner, and most members
are appointed by him, and so the committees are integrated with the regulator on the model of the water
CSCs in England and Wales.

2002 restructuring
In 2002, under the Water Industry (Scotland) Act 200274, the three former Water Authorities in Scotland
were merged into one body, Scottish Water. The Scottish Executive argued that a single authority was better


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placed to avoid regional price disparities, finance capital investment, and maximise economies of scale. The
Act also addressed the issue of consumer representation, by creating five regional Water Customer
Consultation Panels, which are independent of Scottish Water and of other agencies, including the Water
Industry Commissioner. The Scottish consumer council had previously criticized the WICCs as inadequate,
and called for an “independent statutory body which will highlight issue of concern to domestic consumers
and bring these to the attention of regulators, parliament and policy makers”.75

The role of Drinking Water Quality Regulator for Scotland (was also established by the 2002 Act, to provide
an independent check that Scottish Water is complying with drinking water quality regulations.

        “Although the DWQR has similar functions to those of the Drinking Water Inspectorate (DWI) in
        England and Wales, the separation between Ministers and the Regulator is greater in Scotland
        than England and Wales because Scottish Water is a publicly owned body. This contrasts with
        the position in England and Wales where the water utilities are privately owned companies. In
        Scotland the DWQR is responsible for enforcing [water quality regulations] independently of
                                                                                  76
        Ministers, whereas the DWI carries out this role on behalf of Ministers.”

PPP: Scottish Water Solutions
In September 2003, Scottish Water created Scottish Water Solutions, a joint venture 51 per cent owned by
Scottish Water, with the rest split equally between two consortia: Stirling Water (comprising Thames Water
and engineering/construction firms KBR, Alfred McAlpine and MJ Gleeson) and UUGM (United Utilities
and building groups Galliford Try and Morgan Est). Solutions was set up to deliver a large-scale capital
programme, driven largely by national and European requirements. The cost of the programme was
estimated at £2.3bn under normal contracting arrangements, and it is hoped Solutions may be able to deliver
it for the £1.8bn which the regulator recommended as a price tag.77

5.2.2 Northern Ireland
As with Scotland, legal and institutional arrangements in Northern Ireland usually differ from those in
England and Wales. In Northern Ireland, water and sewerage services became the direct responsibility of the
UK government in the mid-1970s under `direct rule', a response to the tensions stemming from Irish
Republicanism. Until 1998 they were the responsibility of central government, executed initially through a
Government ministry and then through an executive agency, Water Services NI. Under the terms of the 1998
settlement (Good Friday Agreement), the agency will be overseen by the Northern Ireland Assembly,
although the current lack of an elected Northern Ireland government (due to political disagreements over the
peace process) means this is not the case as of early 2004.

Since 1994, the regulation of drinking water quality in Northern Ireland is the responsibility of the Drinking
Water Inspectorate unit within the Environment and Heritage Service (EHS) of the Department of the
Environment in Northern Ireland. Under the Water (Northern Ireland) Order 1999 the EHS also has the duty
to promote the conservation of the water resources of Northern Ireland and the cleanliness of water in
waterways and underground strata. The EHS carries out this work, which parallels some of the activities (in
England and Wales) of the Environment Agency, through its Water Management Unit. The Water
Management Unit (WMU) of EHS protects the aquatic environment through a variety of activities including:

         monitoring water quality;
         preparing water quality management plans;
         controlling effluent discharges;
         taking action to combat or minimise the effects of pollution; and
         supporting environmental research78

The Northern Ireland Water Council is a non-departmental public body constituted under Section 4 of the
Water Act (Northern Ireland) 1972. The Council advises the Department of the Environment, Department for
Regional Development, the Department of Agriculture and Rural Development and the Department of
Culture, Arts and Leisure on the exercise of their functions under that Act. The Council's remit includes the



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provision of advice on functions exercised under Water and Sewerage Services (Northern Ireland) Order
1973 and Part III of the Water (Northern Ireland) Order 1999.79

In 2003 a variety of possible changes to the institutional arrangements for water services in Northern Ireland
were under consultation*, including privatization,80 although in October 2003 this was ruled out as an
option.81


6 Financing, water rates and sewerage charges
6.1 England and Wales
6.1.1 Tariff system
Household tariffs for water and sewerage in England and Wales are set every year by the water companies as
a business decision. There is no direct regulation of the actual level of prices, and no taxes are passed on to
consumers through water or sewerage charges. However, there is regulation of changes in prices, with the
regulator Ofwat setting limits to price increases (see below). Within this overall permitted increase (or
required decrease) each company may apply different increases to metered or unmetered water, for example.
However, charging schemes must also avoid discrimination, recover fairly the costs of providing each
service, and maintain a balance between measured and unmeasured household bills (no greater than the extra
costs of providing a metered service).82 Overall, charges should broadly relate to the costs of providing the
service, for metered and non-metered customers alike.83

Most water in England and Wales remains charged under a system where charges bear no relation to
consumption of water. Metered properties do represent a growing proportion (23% in 200284), partly because
all users have since 1999 had the right to have a meter fitted at no cost to themselves; for low-quantity users
metering can save them money. However, most households are still charged on the basis of a local taxation
asset-value known as „rateable value‟ (RV). This was the basis for municipal property taxation in the UK
until 1990, but is no longer used for any purpose except for water charges. It was expected that the use of
RVs would end, but since the 1999 Act, water companies are allowed to continue to use RVs for unmeasured
charging purposes.85 Most companies apply a fixed standing charge, however, as well as a charge related to
RV, which dilutes the impact of the RV; two companies charge only a fixed fee. These fixed charges reduce
the bills of customers with higher RV properties, and increase the bills of customers with lower RV
properties.

The only social subsidies provided for are differentiated tariffs for vulnerable groups, which can cap their
charges at the average level for their area. These caps are only used for metered consumers who are in
receipt of social security benefits: OFWAT refused to allow one water company to extend their scheme to
customers who were not in receipt of benefits, or to non-metered customers.86 A desire to protect low-income
consumers did lead to provisions in the 1999 Water Act banning disconnection of users for non-payment, as
well as the use of pre-payment meters.

            Household bills (weighted average for whole water industry)
                   1999-00                    2004-05            % change1999-00 to 2004-05
            Measured Unmeasured Measured Unmeasured               Measured     Unmeasured
                 224            268         201           250           –10              –7
                                                                                                87
                                                                                   Source: OFWAT

The average household bill in 2003-04 is £236 for water and sewerage (average water bill is £111 and the
average sewerage bill is £125). This is a real terms increase of 21.4% since 1989.
        Average price limits          1990-95                1995-2000                 2000-05
                                                              Ofwat's                  Ofwat's
                                Set at privatisation       determinations           determinations

*
    www.waterreformni.gov.uk


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      Water and sewerage                     5.0%                         1.4%                         -1.7%
      companies
      Water companies                        6.1%                         0.4%                         -2.6%
      Industry                               5.2%                         1.3%                         -1.8%


Discharges from commercial users
Charges are made by the water and sewerage companies to commercial users for trade effluent, based on the
Mogden formula, which seeks to link charges to the costs imposed by customers i.e. according to the volume
and strength of trade effluent discharged, the level of treatment needed and therefore the costs involved.
These costs are averaged across a region and, therefore, do not reflect the costs incurred at any one treatment
works.88

6.1.2 Price setting
Price limits are set for a period of 5 years by OFWAT, providing a stable framework for the companies to
work with.89 A series of mergers and takeovers in the 1990s (often between a water-and-sewerage company
and a water-only company in the same region) however often included price reductions agreed as part of the
conditions of the merger, outside the usual price limit framework.

The price limit framework, most recently set out in November 1999 for the 2000-1 to 2004-5 period, is based
on a review process known as the „periodic review‟. The review goes through a process of consultation and
negotiation with the water companies. The percentage reductions set out are known as K factors, and are
expressed in relation to the general rate of retail price inflation in each year, which is measured in the UK by
the Retail Price Index or RPI. The formula is thus known as RPI-K. The process is based on forecasts of
expenditure and also actual savings in previous years. The regulator identified the key elements in the last
review as:90

                       K = - Po – X + Q + V + S
                       where:
                       Po - Past outperformance (actual cost savings made by the
                       companies above what was assumed in the previous review)
                       X - Future efficiency gains
                       Q - Quality standards
                       V - Enhancements to the security of supply
                       S - Enhanced service levels

      Average increases/decreases set by OFWAT, 2000/1-2004/5
      (whole water industry, including water-and-sewerage and water-only companies)
                             2000        2001       2002       2003         2004                            Average
                                                                                                            for period
      Industry weighted          –12.3          –0.4           0.1            1.1            1.5            –2.1
      average
      Source: OFWAT Final determinations: Future water and sewerage charges 2000-05. November 1999. Table 1, p.11

For 2000-2005 OFWAT originally proposed an average annual reduction of –2.9%; the companies‟ draft
business plans proposed an average annual increase of +3.8%; the final K factors set by OFWAT resulted in
an average annual reduction of –2.1% over the whole period, which was „front-loaded‟, with an average
reduction of 12.3% in 2001.

6.1.3 Price differential between regions
Regulation does not impose standardised price levels or increases. Both the level of charges, and the annual
increase in charges, vary between companies. There is no system for public cross-subsidy between regions or
between companies. Regional variations in levels and increases are significant.

        Average expected household bills (£ sterling)
                            1999-2000              2004-2005                        Change


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                                Water   Sewerage      Water   Sewerage      Water   Sewerage        Total


       Water and sewerage companies
       Anglian              120              157       105         142       –15         –15        –30
       Dwr Cymru            134              168       114         150       –20         –18        –38
       North West           104              143       117         121        13         –22         –9
       Northumbrian         101              143        86         111       –15         –32        –47
       Severn Trent         113              118       102          91       –11         –27        –38
       South West           119              237       115         205        –4         –32        –36
       Southern             112              166        83         156       –29         –10        –39
       Thames               104              102        94          86       –10         –16        –26
       Wessex               126              146       113         138       –13          –8        –21
       Yorkshire            115              126        99         111       –16         –15        –31

       WaSC (weighted            112         135       103         116         –9        –19        –28
       average)

       Water only companies
       Bournemouth          101                         98                    –3                     –3
       Bristol              113                        100                   –13                    –13
       Cambridge             97                         83                   –14                    –14
       Cholderton           139                        121                   –18                    –18
       Dee Valley           120                         96                   –24                    –24
       Essex & Suffolk      128                        108                   –20                    –20
       Folkestone &         117                        126                     9                      9
       Dover
       Mid Kent             147                        117                   –30                    –30
       North Surrey         125                        107                   –18                    –18
       Portsmouth            81                         74                    –7                     –7
       South East           138                        108                   –30                    –30
       South Staffordshire   88                         82                    –6                     –6
       Sutton & E Surrey    133                         96                   –37                    –37
       Tendring Hundred     148                        132                   –16                    –16
       Three Valleys        125                        103                   –22                    –22
       York                  96                         84                   –12                    –12
       WoC                  119                        100                   –19                    –19
       Industry             113              135       102         116       –11         –19        –30
       (weighted
       average)
                                                                                                      91
                                                                                        Source: OFWAT



      Proportion of sewerage customers taking metered supplies in 2000-01 and 2001-02
                                                               % of total
                              Households                             Non-households
                              2000-01              2001-02           2000-01        2001-02
      Water & sewerage companies
      Industry average          19.1              21.5              83.5                 84.4
      (weighted)
      Note: The percentage of metered customers for 2000-01 and 2001-02 are estimates based on provisional and
      forecast data provided by each company.


Water and waste water services accounted for about 2.5% of annual gross capital formation in 1994 to
1995.92




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6.2 Scotland and Northern Ireland
In Scotland, sections 29 to 40 of the Water Industry (Scotland) Act 200293 deal with charging arrangements.
In general terms the legislation gives Scottish Water considerable discretion in developing and applying
charging policy, subject to the revenue cap intimated by the Scottish Ministers.94

In Northern Ireland, the charging system is (as of 2004) under review; currently most funding for the water
sector comes from general taxation rather than water bills. In 1999, three-quarters of the total expenditure of
£195m was financed by the rates (local government taxation), which provided £150m; charges for
commercial water use, trade effluent charges and connection charges, provided £36m; and the balance of
£9m came from central government.95 Consumers‟ payment through rates was quantified in 1999: the
minister‟s forward to the consultation paper of that year noted that “the contribution this year by the average
domestic ratepayer in Northern Ireland for water and sewerage services is £127”. 96




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7 Specific factors in the national context
7.1 UK constitutional system
The legal and institutional framework in the UK can be comparatively easily altered by the Parliament of the
day. This is largely due to the UK‟s historical lack of a written constitution, a well-defined separation of
powers, and a meaningfully bicameral legislature. This, together with the UK‟s first-past-the-post electoral
system, makes the UK in many respects a highly centralized state – to the point that it has been called an
„elective dictatorship‟.97 The lack of a constitutionally-defined role for local and regional government in
particular has made it easy for successive central governments to exercise far more power over
municipalities than is usual elsewhere in Europe – a situation perhaps best exemplified by Margaret
Thatcher‟s ability in 1986 to simply abolish London‟s metropolitan council due to a dislike of its political
leadership.

The nature of the UK‟s political system has also made possible, in the last thirty years, two radical
restructurings of the water sector in England and Wales (different arrangements apply in Scotland and
Northern Ireland) on a scale unseen elsewhere in western Europe. The first of these occurred in 1974, when
Regional Water Authorities were created, based on principles of river basin management, through merger of
existing municipal companies. The second occurred in 1989, when these Regional Water Authorities were
privatized through the sale of their assets to the private sector, together with the creation of a regulatory
framework.


7.2 Conservative political philosophy of the 1980s
The 1989 restructuring of the water industry was to some degree a reaction to the investment needs deriving
from EU legislation; needs which were particularly acute in the face of a history of underinvestment. In large
part, however, both the fact and the form of privatization of the water industry proceeded logically from the
political philosophy (often known as „Thatcherism‟ after the Prime Minister of the day) of the Conservative
governments of the 1980s. The withdrawal of the state from sectors which could be handed over to the
private sector was a basic tenet of this philosophy, founded on the primacy and superiority of the market over
the public sector. This philosophy was being or had been put into action in areas including air travel,
telecoms, gas and electricity, when the discussion moved to include the future of the water industry. Like the
sectors just mentioned, water was under national control, and with an absolute majority in Parliament its
privatization was something which could be carried out with little more than a simple decision of the
executive. The institutional ability to make this decision was therefore in the 1980s combined with a political
philosophy that made the decision perhaps inevitable.

Moreover, the nature of the privatization, by sale of the assets, was also in large part determined by the
Conservative political philosophy which saw the transformation of a public monopoly onto a private one as
both necessary and sufficient, with little need to look at how other aspects of the existing situation (other
than its position in the public sector) might be changed. Other options were also limited by the desire of the
government to carry out the change quickly, as well as by its unwillingness to consider structures (such as
franchising) that would give a greater role to the public or to local authorities. Both of these desires therefore
dictated a minimum of structural change*, other than privatization, and lead to the decision to simply float
the existing public bodies on the stock exchange.




*
 Indeed, for a time it was envisaged that the privatized bodies would even retain the environmental regulation functions
which the RWAs had. Eventually it was decide to separate these functions out and give them to a new body, the NRA.
(Hassan 1998: 169-170)


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    8 Relevant actors, roles and characteristics
    8.1 Institutional actors, 2004
    The institutional actors in the England and Wales water industry, along with their roles and relationships, are
    summarised in the diagram below. The structure is broadly similar in Scotland and Northern Ireland, with the
    major exception that in each of these regions there is only one, publicly-owned, water company; and that
    some of the functions are carried out by separate entities – for example in Scotland the work of the Drinking
    Water Inspectorate is carried out by the Drinking Water Quality Regulator for Scotland. (See relevant
    sections of the institutional framework above for more details.) *


                                                             European Union

                                                 Water Framework Directive
                                                 Urban Wastewater Treatment Directive
                                                 Drinking Water Directive
                                                 Bathing Water Directive



                                                                            Central government

                                                     Water Acts                            Drinking Water Inspectorate
                                                     relationship with agencies
                                                                                            drinking water quality
               Competition Commission

               mergers and takeovers
                                                                                   Ofwat
          Environment Agency                          price regulation                          Water Voice*

 environmental management                                                                 consumer representation
 water control and flood prevention
 surface water management




                  Water and sewerage companies (10)                                 Water-only companies (13)

           production and distribution of drinking water                 production and distribution of drinking water
           wastewater treatment




    8.2 Other actors
    Several groups of non-institutional actors (that is, those which are not public bodies) are significant in the
    UK water sector, including shareholders of water companies; environmental NGOs; consumer NGOs;
    political parties and trade unions.

    *
        From October 2005, WaterVoice is to be a separate agency rather than effectively a semi-independent part of Ofwat.


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The relationship between shareholders (and, to a lesser extent, lenders such as bondholders and banks) and
the managers of the water companies is a key factor in the water companies‟ behaviour. Particularly in the
early 1990s, companies were able to beat the regulatory regime, through a variety of techniques such as
reducing investment and taking the savings as profits (in order to boost dividends), and did so in order to
appeal to shareholders. This made shareholders collectively a key actor, as water company profits
consistently exceeded expectations, and share prices and dividends significantly outperformed the stock
market. A resulting public perception of rising prices, high remuneration for top executives and
underinvestment damaged the industry‟s reputation.

Environmental NGOs, consumer NGOs, and trade unions each play important roles in supporting the
interests that they represent. On the environmental front, this has included the Royal Society for the
Protection of Birds, the Council for the Protection of Rural England, and Friends of the Earth, which have
campaigned for stronger environmental regulation and pressed for higher investment in environmental
infrastructure, such as wastewater treatment works. Consumer NGOs such as the National Consumer Council
and the Consumers Association have been leading critics of the consumer representation structures that
existed prior to the 2003 Water Act, criticised price rises, and led campaigns against disconnections. They
contributed to Labour‟s decision to ban disconnections, and later to reform the consumer representation
structure in the water industry. Both environmental and consumer NGOs have supported metering.

The impact of two other types of actor should also be noted – political parties and municipalities.
Municipalities lost most of their responsibilities for the water sector in the 1974 reorganisation, and lost most
remaining supervisory powers in the 1980s; what remains is largely a vestigial responsibility for the local
regulation of drinking water quality. (In some cases, such as Swansea, the delegation of operation and
maintenance of wastewater systems is still delegated to municipalities; this delegation is however entirely at
the discretion of the ten water and sewerage companies.) Politically, water is now rarely an issue at
municipal level. However, this is not true at national level, where the particular policies of political parties
have had a significant impact. In particular, this includes the Conservative privatization policies of the 1980s,
later extended to water (see 7.2 above); and Labour‟s policies on water in the campaign for the 1997
election. This included promises to ban disconnections and pre-payment meters, as well as to implement a
one-off „windfall tax‟ on the excess profits earned by the privatized utilities since privatization, including the
water companies. These policies were implemented following Labour‟s election victory in 1997. Since then,
party-political factors (i.e. the wishes of the governing party) may also have had an influence on some
regulatory decisions – see the Cardiff and Leeds case studies.




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9 Participation
9.1 UK political structure and culture
The UK historically has a highly centralised system of government. This is largely due to the UK‟s historical
lack of a written constitution, a well-defined separation of powers, and a meaningfully bicameral legislature.
This, together with the UK‟s first-past-the-post electoral system, makes the UK in many respects a highly
centralized state – to the point that it has been called an „elective dictatorship‟. 98 This is a colourful way of
saying that the combination of these institutional features gives the national government essentially
unqualified power to govern (usually described as „Parliamentary sovereignty‟): by default the national
government has the power to rewrite the UK institutional and legal framework at the stroke of a pen. (Since
1973, integration into the European legal framework constrains this position somewhat.) The lack of a
constitutionally-defined role for local and regional government in particular has made it easy for successive
central governments to exercise far more power over municipalities than is usual elsewhere in Europe – a
situation perhaps best exemplified by Margaret Thatcher‟s ability in 1986 to simply abolish London‟s
metropolitan council due to a dislike of its political leadership.

The highly centralized political structure both reflects the underlying British political culture and helps
perpetuate it (notable is the Catch-22 under which the Liberal Democrats‟ campaign for proportional
representation is because of the first-past-the-post system in practical terms doomed to failure, unless one of
the two leading parties adopts it). The prevailing assumption remains that the two choices for governments to
deal with people is by treating them either as subjects to be provided for (from a political perspective), or
consumers to be catered for (from an economic perspective), a distinction which before the advent of New
Labour fairly neatly divided the two main parties (Labour and Conservative respectively). The concept of
active citizenry is somewhat foreign to this ideological struggle, as the concept of the “stakeholder”,
peculiarly British in being a messy compromise between the two camps, demonstrates.

This political culture is reflected in a culture of secrecy, which whilst hardly unique, has been less
systematically combated than elsewhere because of (once again) the lack of a written constitution which
might prompt such moves, or a government decentralised enough to generate the internal tensions to demand
them. Thus, until recently, the UK had an Official Secrets Act, but not a Freedom of Information Act,
because the presumption has been that if information is not specifically permitted to be released, than it is to
be kept from the public. Even the recent Freedom of Information Act 200099 (taking full effect 2005) does
not go as far some other European countries, or the United States.


9.2 Participation in the UK water sector
The extent of participation in decision-making in the UK water sector is limited, reflecting a long tradition of
viewing the water sector through a technocratic prism („leave it to the experts‟). The participatoriness of the
sector has increased somewhat since the 1980s, with more consultation exercises by regulators and
government, and the creation of consumer bodies, as well as moves under the Water Framework Directive to
increase participation in water resources planning. However, given the recasting of citizens as consumers
that privatization entailed, as well as the desires of private companies to maintain commercial
confidentiality, participation in the urban water sector remains institutionally limited. The water companies
issue bills with information on how the water charges are calculated, but information on breakdown of costs
is not publicly available. There is no system of representation of consumers, employees or public authorities
on the boards of the English water companies: shareholders alone appoint board members, as with other UK
private companies.

A rare exception (more apparent than actual in its exceptionalism) is Glas Cymru, the company which now
runs water in Wales. Glas Cymru is structured as a not-for profit company.100 Glas Cymru‟s statement of
principles addressed to the Welsh Parliament contains no special commitment to consultation, beyond what
is required under OFWAT‟s licence, but does state that it plans to be transparent and has no incentive for
secrecy.101 Directors are appointed by the Board itself, and Glas Cymru‟s constitution requires that the Board


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at all times has a majority of non-executive Directors; but this only means that the directors should not have
executive responsibilities – they are not required to be representative of stakeholders or any other group. The
contrast with institutions in other countries that are superficially similar (such as Dutch water boards, or
German wastewater associations) is striking.

Electorally, municipal elections no longer have any significance for water. National elections still provide
some role for citizen participation, as water issues have been important factors in UK election campaigns in
1987, 1992, and 1997 (and concern over the impact of water prices on the forthcoming election in 2005 and
2006 have influenced government decisions over price caps being set in 2004). This is qualified by the fact
that at national level water is only one issue of many, and the electoral impact of voters‟ particular concerns
is therefore muted.


9.3 Consumers’ representation102
Regional Customer Service Committees (CSCs), one for each water-and-sewerage company, were created at
privatisation as an integral part of the structure of OFWAT itself. 103 OFWAT created a national non-
statutory body, the Ofwat National Customer Council (ONCC), consisting of the chairs of the 10 CSCs.104 In
2002 the body renamed itself „WaterVoice‟, with the ONCC known as the WaterVoice Council and the
CSCs known as WaterVoice Committees. The committees‟ statutory duties are to represent the interests of
all customers, and investigate and monitor complaints about the water companies. The committees are
appointed by, staffed by, and financed through OFWAT. The chairpersons are appointed by the Director-
General of OFWAT, and then the chair appoints the other members of the committee. Staff are OFWAT
employees, and WaterVoice‟s budget comes from Ofwat. WaterVoice reports annually to the Director-
General of OFWAT.

CSCs are formally consulted by OFWAT as part of the periodic review process for setting new price limits.
The CSCs have no statutory rights to information from the companies, except what the companies give them
voluntarily, and so access depends on good working relations and personal contacts. The CSCs have good
access to OFWAT generated information as a result of their integration within OFWAT, including monthly
reports highlighting regional issues as well as the monthly meetings of ONCC. The CSCs have been able to
improve companies‟ complaints procedures.

They are not alone in representing consumers: in practice they may be regarded as interacting with the
political processes involving democratic electoral bodies, such as municipalities and parliament, agencies,
such as OFWAT itself, and the lobbying and campaigning activity of other bodies, including single issue
campaigns, general consumer interest groups, trade unions and others. Furthermore, although the
WaterVoice‟s duty is to represent the interest of consumers, it has been criticised as not being representative
of, never mind elected by, consumers. For example, the National Union of Residents Association commented
on the suggestion that the CSCs and the ONCC are between them “the voice of the customer”, saying

      “With respect that is not so. They have not been elected by consumers to act in that capacity.
      Nor, as far as one can gather can it be said that any individual members have been authorised
      by a large section of a local community to represent its views….In our experience it is very rare
                                                                                            105
      for a committee’s decision ever to have been based on consultation with the public.”

In other words, the CSCs/ONCC falls firmly in the technocratic tradition – consumers are „represented‟ not
by people chosen by them, but by experts with a duty to safeguard their interests.

See ‘institutional framework’ above for recent developments, and the ‘Cardiff and Leeds’ case studies for a
look at the recent history of consumer representation in the water sector.




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9.4 Workers’ representation
There is no formal representation of workers in the structures of OFWAT, nor of the CSCs, the DWI or the
Environment Agency. There is no provision in the water industry, nor any general provision in UK law, for
employee participation in decision-making of the water companies. There are no supervisory boards.

Trade union organisation remains relatively high for private companies. In 2001 the percentage of employees
in water and energy industries in the UK who were trade union members was 54% - separate figures for
water alone were not published. The national average union density for the UK was 29% - but in the private
sector the average was 19%, in the public sector 59%. Water and energy were much the highest density in
the private sector.106

One example of a recent issues for water workers‟ trade unions‟ include the impact on employment of
OFWAT‟s 1999-2000 pricing review. The trade unions were concerned that the price reductions should not
lead to corresponding reductions in jobs in order to protect dividends to shareholders. Another example has
been the concern to regulate the effects of restructuring including proposals for mergers, takeovers and
mutualisation, during which the trade unions have endeavoured to obtain assurances from new owners.



10 Bibliography
Dwr Cymru (2003), Annual Report 2003,
http://www.dwrcymru.com/English/Results/_pdf/AnnualReport2003.pdf

Environment Agency (2001), State of Water Resources, A Water Resources Strategy for England and Wales,
March 2001. http://www.environment-agency.gov.uk/commondata/105385/national_report_english.pdf

Green, Colin (2000), “The lessons from the privatisation of the wastewater and water industry in England
and Wales”, December 2000. Paper presented to conference in Berlin on water privatisation.

Hall, D. (1998) Restructuring and privatization in the public utilities, in L. De Luca (Ed.) Labour and social
dimensions of privatisation and restructuring (public utilities: water, gas and electricity), pp. 109-151
(Geneva, International Labour Office).

Hall, D. (2002), “Consumer representation in water in the UK”, Flux, September 2002

Hall, D. and Lobina, E. (1999) “Public Sector Alternatives To Water Supply And Sewerage Privatization:
Case Studies” in International Journal of Water Resources Development, Vol 16, No.1, 35-55, 2000

Hassan, John (1998), A history of water in modern England and Wales, Manchester: Manchester University
Press

Jenkinson, T. & Mayer, C. (1994), “The Costs of Privatization in the UK and France”, in Bishop, M., Kay, J.
& Mayer, C. (eds.), Privatization & Economic Performance, pp. 290-298 (New York, Oxford University
Press).

House of Commons Select Committee on the Environment Seventh Report 199-200: Water Prices and the
Environment HC 597 14 November 2000 (HOCSCE7); www.parliament.the-stationery-
office.co.uk/pa/cm199900/cmselect/cmenvaud/597/59702.htm

House of Commons Library Research Paper 98/117 (1998), “Water Industry Bill – Bill 1 [1998/1999]: 10
December 1998




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House of Commons (2003), Water Act 2003,
http://www.legislation.hmso.gov.uk/acts/acts2003/20030037.htm

Ofwat (2000a), “Information Note No 35A - March 2000. Serviceability of the Water Main and Sewer
Networks in England and Wales up to March 1999”.
http://www.ofwat.gov.uk/aptrix/ofwat/publish.nsf/Content/serviceabilityofnetworks

Ofwat (2000b), “Information Note No 35B - March 2000. Serviceability of water treatment works, water
storage, water pumping stations, sewage treatment works, sewage pumping stations and sludge treatment
facilities in England and Wales up to March 1999”.
http://www.ofwat.gov.uk/aptrix/ofwat/publish.nsf/Content/serviceabilitywatertreatment

Ofwat (2002), “Tariff structure and charges: 2002-2003 report”, May 2002
http://www.ofwat.gov.uk/pdffiles/tariffs_report02.pdf

Page, Ben & Bakker, Karen (in press 2003), "Water users in a privatised water industry: Participation in
policy-making and in water services provision a case study of England and Wales", International Journal of
Water

Schönbäck, Wilfried; Oppolzer, Gerlinde; Kraemer, R. Andreas; Hansen, Wenke; and Herbke, Nadine (eds,
2003), Internationaler Vergleich der Siedlungswasserwirtschaft, June 2003

Shaoul, Jean, (1998), “Water Clean Up and Transparency: The Accountability of the Regulatory Process in
the Water Industry, A Public Interest Report”, Dept of Accounting and Finance, Manchester University,
1998.

Shaoul, Jean, (2000), “Tapping into mutuals”, Public Finance, September 8-14 2000, pp. 16-19

Stone and Webster Consultants (2004), Investigation into evidence for economies of scale in the water and
sewerage industry in England and Wales. London, UK, Office of Water Services 2004.
http://www.ofwat.gov.uk/aptrix/ofwat/publish.nsf/AttachmentsByTitle/stone_webster_150104.pdf/$FILE/sto
ne_webster_150104.pdf

UK Meteorological Office website, accessed March 2004. http://www.met-
office.gov.uk/climate/uk/averages/19611990/


11 Websites
Ofwat: www.ofwat.gov.uk
Environment Agency: www.environment-agency.gov.uk
Drinking Water Inspectorate: www.dwi.gov.uk
Water Voice: www.watervoice.org.uk
Water UK: www.water.org.uk [represents UK water and wastewater service suppliers at national and
European level]
Competition Commission: www.competition-commission.org.uk
National Assembly for Wales: www.wales.gov.uk

Water Services NI: www.waterni.gov.uk
Environment and Heritage Service Northern Ireland:
www.ehsni.gov.uk/environment/waterManage/policy/policy.shtml
Drinking Water Inspectorate (NI): www.ehsni.gov.uk/environment/drinkWater/drinkWater.shtml
Northern Ireland Assembly: www.ni-assembly.gov.uk
Water Council NI: www.watercouncilni.org



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Scottish Water: www.scottishwater.co.uk
Drinking Water Quality Regulator for Scotland: www.dwqr.org.uk
The Water Industry Commissioner for Scotland (WIC): www.watercommissioner.co.uk
Water Customer Consultation Panels: www.watercustomer.org [5 regional panels in Scotland]
Scottish Environment Protection Agency: www.sepa.org.uk
Scottish Executive: www.scotland.gov.uk [the devolved government for Scotland]



1
  Country profile: United Kingdom (BBC) http://news.bbc.co.uk/1/hi/world/europe/country_profiles/1038758.stm
2
  Schönbäck et al (2003), p157
3
  CIA World Factbook 2003. www.cia.gov/cia/publications/factbook/
4
  Zabel and Rees (1997)
5
  Schönbäck et al (2003), p159
6
  Tunstall, Sylvia, and Green, Colin (2003), “From listener to talker: the changing social role of the citizen in England
and Wales”. HarmoniCOP project. http://www.harmonicop.info/_files/_down/UK.pdf
7
  Schönbäck et al (2003), p160
8
  Ofwat, “Tariff structure and charges: 2001-2002 report”, June 2001, pp. 69-72
9
  Ofwat, “Leakage and the efficient use of water 2000-2001 report”, pp. 19-21
10
   Source: Ofwat (2000a and b) unless otherwise specified, adjusted where possible with figures from Dwr Cymru
(2003)
11
   http://www.waterni.gov.uk/home-about.htm
12
   http://www.scottishwater.co.uk/html/about_us.html
13
   Dwr Cymru (2003), Annual Report 2003, p11
http://www.dwrcymru.com/English/Results/_pdf/AnnualReport2003.pdf
14
   Water UK. www.water.org.uk
15
   Ofwat (2000)
16
   Water UK. www.water.org.uk
17
   Ofwat (2000)
18
   Hassan (1998), p132
19
   Hassan (1998), p127
20
   Hassan (1998), p133
21
   Metropolitan Areas and Sustainable Use of Water - The Case of London. Castro Esteban and Erik Swyngendow.
School of Geography, University of Oxford. Oxford, November 2000.
http://www.feweb.vu.nl/re/regional/Metron/metrondocs/london1.pdf
22
     Hansard 30 November 1990 Written Answers Col 502 „Water Authorities‟ http://www.parliament.the-stationery-
office.co.uk/pa/cm199091/cmhansrd/1990-11-30/Writtens-2.html
23
   http://www.hmso.gov.uk/acts/acts1989/Ukpga_19890015_en_1.htm
24
   Water Act 1989 s. 11-12
25
   OFWAT The changing structure of the water and sewerage industries in England and Wales (Information Note 29)
Rev. ed. May 2000. Page 1
26
   Simon Taylor, “Playing by the rules”, in Water, Number 139/140, 9 January 2002, pp. 8-9
27
   http://www.hmso.gov.uk/acts/acts1991/Ukpga_19910056_en_1.htm
28
   Individuals and establishments may receive their water supply from an unlicensed supplier : these are not regulated
by OFWAT but by local authorities. It is also possible for people to develop their own supply and service, also
regulated by local authorities. .[- Ofwat, “Inset Appointments: Guidance for Applicants”, February 1999
http://www.ofwat.gov.uk/inset_appointments.htm ]
Inset appointments allow customers to choose an alternative regulated supplier. Only 9 such appointments have been
made - for four large users and five greenfield sites (two of which had been privately supplied). One of these greenfield
site insets is for an area that will be developed for residential purposes. [Ofwat, “The Current State of Market
Competition”, July 2000 http://www.ofwat.gov.uk/pdffiles/currentstateofmarketcomp.pdf ; Current List of Inset
Appointments April 2002 http://www.ofwat.gov.uk/competition/current_insets_180402.pdf ]
29
   Ofwat, “Market Competition in the Water and Sewerage Industry”, Information note n. 10 April 1992 (revised August
2000), http://www.ofwat.gov.uk/infonotes/info10update.html
30
   http://www.hmso.gov.uk/acts/acts1991/Ukpga_19910056_en_1.htm
31
   Ofwat, “The changing structure of the water and sewerage industry in England and Wales”, INFORMATION NOTE
NO. 29 August 1994 (Revised May 2000) - http://www.ofwat.gov.uk/pdffiles/in29.pdf
32
   Ibid.
33
    Ofwat, “The Role of the regulator”, http://www.ofwat.gov.uk/rolereg.htm



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34
   http://www.hmso.gov.uk/acts/acts1999/19990009.htm
35
   House of Commons (2003), Water Act 2003. http://www.legislation.hmso.gov.uk/acts/acts2003/20030037.htm
36
   DEFRA. http://www.defra.gov.uk/environment/water/legislation/
37
   Michael Harrison, The Independent, 28 February 2004, “Thousands of firms get to pick water supplier”
38
   Karma Ockenden, Utility Week, 5 March 2004, “Ofwat access price formula savaged”
39
   Val Patchett, Utility Week, 5 December 2003, “Logical conclusion; Enviro-Logic spearheaded the drive for water
competition. Its demise does not bode well for competitive prospects”
40
   Arable Farming, 16 December 2003, “Royal assent for Water Act”
41
   Office Of Water Services, 21 November 2003, “OFWAT welcome as Water Act receives Royal Assent”
42
   M2 Presswire, 26 February 2004, “UK Government, Ofwat to consult on new powers to fine water companies”
43
   http://www.scotland-legislation.hmso.gov.uk/legislation/scotland/acts2002/20020003.htm
44
   Water Customer Consultation Panels (2003), “Principles of charging for water and wastewater”, August 2003,
http://www.watercustomer.org/watercust/web/site/waterpanel/reports/reports_principles.asp. (See especially Section 3,
“Charging: the Legal Framework”, http://www.watercustomer.org/watercust/web/FILES/principles_5.pdf)
45
   http://www.scotland-legislation.hmso.gov.uk/legislation/scotland/acts2003/20030003.htm
46
   http://www.legislation.hmso.gov.uk/si/si1999/19990662.htm
47
   http://www.ehsni.gov.uk/pubs/publications/finalregs.pdf
48
   Ofwat states that: “Since February 1996, companies have had a duty to promote the efficient use of water by all their
customers and we are responsible for enforcing this duty”. One of the four criteria in assessing whether companies fulfil
the duty to promote the efficient use of water is the following: “Is there an efficient pricing framework, providing
measured customers with appropriate incentives to use water wisely?”. “Promoting the efficient use of water”. Ofwat,
“Leakage and the efficient use of water 2000-2001 report”, p. 22
49
   Environment Agency, “Chapter 2. Frameworks and Principles”, A Water Resources Strategy for England and Wales,
March 2001, p. 16-19
50
   “Charges for Sewerage Services”. Ofwat, “Tariff structure and charges: 2001-2002 report”, June 2001, p. 43.
However, the following is worth noting: “All sewerage companies now provide surface water drainage rebates for
customers not connected to the public sewer. … in some cases publicity for the rebates is not as clear as it should be.”
Ibid, p5
51
   http://www.competition-commission.org.uk/rep_pub/reports/2002/fulltext/472a5.1.pdf
52
   Stone and Webster Consultants (2004), Investigation into evidence for economies of scale in the water and sewerage
industry in England and Wales. London, UK, Office of Water Services 2004.
http://www.ofwat.gov.uk/aptrix/ofwat/publish.nsf/AttachmentsByTitle/stone_webster_150104.pdf/$FILE/stone_webste
r_150104.pdf
53
   http://www.defra.gov.uk/environment/water/
54
   See also: Ofwat, “The Role of the regulator”, http://www.ofwat.gov.uk/rolereg.htm
55
   DEFRA website (accessed April 2004). http://www.defra.gov.uk/environment/water/legislation/default.htm
56
   Environment Agency, “Chapter 2. Frameworks and Principles”, A Water Resources Strategy for England and Wales,
March 2001, pp. 16-19
57
    Environment Agency website http://www.environment-agency.gov.uk/subjects/waterquality/
58
   Environment Agency, “Chapter 2. Frameworks and Principles”, A Water Resources Strategy for England and Wales,
March 2001, pp. 16-19
59
   [source: Environment Agency http://www.environment-agency.gov.uk/ ]
60
   In 1999 the Environment Agency responded to 36,623 reports of environmental pollution in 1999. 14,374 were
substantiated as having an impact on the water environment, a decrease of about 20% compared with 1998 data. There
were 227 successful prosecutions for water pollution in 1999, (out of a total of 230). In addition, 113 cautions were
issued and a total of over £1.1 million recovered in costs.
61
   Environment Agency (2001), “Managing Water Abstraction - the Catchment Abstraction Management Strategy
process”, April 2001. http://www.environment-agency.gov.uk/commondata/105385/128301
62
   Water Act 1989 s.6 (now Water Industry Act 1991 s.28)
63
   The Ofwat National Customer Council And The Ten Regional Customer Service Committees
Draft Forward Plan 2001- 2002. April 2001
64
   Ofwat. http://www.ofwat.gov.uk/aptrix/ofwat/publish.nsf/Content/WaterVoice+Council+Press+Notice+10%2F04
65
   Ofwat. http://www.ofwat.gov.uk/aptrix/ofwat/publish.nsf/Content/WaterVoice+Council+Press+Notice+10%2F04;
DEFRA. http://www.defra.gov.uk/news/2004/040407c.htm
66
   Office Of Water Services, 21 November 2003, “OFWAT welcome as Water Act receives Royal Assent”
67
   Ibid.
68
   Food safety is covered separately by the Food Standards Act 1999 which created the Food Standards Agency (FSA)
to monitor food safety. The FSA is responsible for the quality of bottled water.
http://www.foodstandards.gov.uk/foodindustry/regulation/foodstandardsact



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69
   DWI website http://www.dwi.gov.uk/aboutus/index.htm
70
   Neil Summerton, “The British way in water”, Water Policy 1 (1998), p47
71
   Neil Summerton, “The British way in water”, Water Policy 1 (1998), p47
72
   Local Government etc. (Scotland) Act 1994 http://www.hmso.gov.uk/acts/acts1994/Ukpga_19940039_en_1.htm
73
   Water Industry Bill. .House of Commons Research Paper 98/117
74
   http://www.scotland-legislation.hmso.gov.uk/legislation/scotland/acts2002/20020003.htm
75
    SCC calls for water industry watchdog. SCC press statement 26/07/01
76
   http://www.dwqr.org.uk/role.html
77
   Karma Ockenden, Utility Week, 1 April 2004, “The melting point; Scottish Water Solutions has its work cut out
trying to get eight groups of people working together.”
78
   http://www.ehsni.gov.uk/environment/waterManage/roles/roles.shtml
79
   http://www.watercouncilni.org/randf.asp
80
   See Hall, David (2003), Response to the consultation document ‘Reform of Water and sewerage services in Northern
Ireland’, March 2003. www.psiru.org
81
   Department for Regional Development (2003), “Spellar rules out water privatisation and flat charge”, 7 October
2003. http://www.waterreformni.gov.uk/ContMan/Uploads/press_release_071003_ver2.pdf
82
   Ofwat, “Tariff structure and charges: 2001-2002 report”, June 2001, pp. 41-42 p.17
83
   Ofwat, Protecting the interests of water customers www.ofwat.gov.uk/pubslist/leaflets/protect.htm)
84

http://www.ofwat.gov.uk/aptrix/ofwat/publish.nsf/AttachmentsByTitle/water_regfacts_figs.doc/$FILE/water_regfacts_f
igs.doc
85
   Where properties do not have an RV (for example in homes built since March 1990) or where the RV is particularly
outdated (for example where premises have been extensively altered) companies may apply a notional RV charge based
on criteria such as the size and location of the property.
86
   Ofwat, “Tariff structure and charges: 2002-2003 report”, June 2002, p21
http://www.ofwat.gov.uk/pdffiles/tariffs_report02.pdf .
87
   OFWAT Final determinations: Future water and sewerage charges 2000-05. November 1999. Table 9 p.81
88
   Ofwat, “Tariff structure and charges: 2001-2002 report”, June 2001, pp. 46-48
89
   Final Determinations: Future water and sewerage charges 2000-05. OFWAT. 25 November 1999
http://www.ofwat.gov.uk/final_determinations.htm
90
   Ofwat, “Tariff structure and charges: 2002-2003 report”, May 2002 p9
http://www.ofwat.gov.uk/pdffiles/tariffs_report02.pdf
91
    Final determinations: Future water and sewerage charges 2000-05. November 1999 Table 4, p.18
92
   Neil Summerton, “The British way in water”, Water Policy 1 (1998) 45-65
93
   http://www.scotland-legislation.hmso.gov.uk/legislation/scotland/acts2002/20020003.htm
94
   Water Customer Consultation Panels (2003), “Principles of charging for water and wastewater”, August 2003,
http://www.watercustomer.org/watercust/web/site/waterpanel/reports/reports_principles.asp. (See especially Section 3,
“Charging: the Legal Framework”, http://www.watercustomer.org/watercust/web/FILES/principles_5.pdf)
95
   Water and Sewerage Services in Northern Ireland – a consultation document. DoE 1999; p.9, para 3.2
96
   Water and Sewerage Services in Northern Ireland – a consultation document. DoE 1999; p.2
97
   Lord Hailsham, „Elective Dictatorship‟, The Richard Dimbleby Lecture - The Listener: 21 October 1976
98
   Lord Hailsham, „Elective Dictatorship‟, The Richard Dimbleby Lecture - The Listener: 21 October 1976
99
   www.hmso.gov.uk/acts/acts2000/20000036.htm
100
    For the formal articles of the company see http://www.dwrcymru.com/Glascymrusite/English/_pdf/CorpGov.pdf ;
for the procedure for becoming a member see
http://www.dwrcymru.com/Glascymrusite/English/membership/Become_Member/_pdf/BriefingMem.pdf
101
    http://www.dwrcymru.com/Glascymrusite/English/archive/openletters/_pdf/openletterfm3nov00.pdf
102
    This section is based on Hall (2002)
103
    Water Act 1989 s.6 (now Water Industry Act 1991 s.28)
104
    The Ofwat National Customer Council And The Ten Regional Customer Service Committees
Draft Forward Plan 2001- 2002. April 2001
105
    Page: “Results of the case study on the water supply in London & the UK”. 2001 http://www.ifs.tu-
darmstadt.de/pg/heinelt/p_eu_2000-2002-page.pdf
106
 [Trade union membership: an analysis of data from the autumn 2001 LFS. By Keith Brook. Labour
Market Trends July 2002p. 343. DTI. http://www.dti.gov.uk/er/emar/artic_01.pdf ]




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