South East Water

(Limited Text - Ministerial Extracts only)

Tuesday 17th January 2023 Westminster Hall

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Rebecca Pow)]

It is a pleasure to see you in the Chair, Sir George. I thank my right hon. Friend the Member for Tunbridge Wells (Greg Clark) for bringing the serious matter of what has gone on with South East Water to the Chamber—one of his constituents said, “What on earth is going on?” I must also thank him for his plain speaking. There is no need to beat about the bush here. Similarly, my hon. Friend the Member for Maidstone and The Weald (Mrs Grant). Let us say it as it is. I was very disappointed in the repeated supply issues experienced by South East Water’s customers and the impacts that it has had on them. Some pretty heart-rending examples were given, particularly where they related to health issues such as the diabetes example and the closing of the dialysis unit. Those are really serious knock-on effects; as my right hon. Friend the Member for Tunbridge Wells said, and as I say regularly, access to water is a right, and that should not be in question.

I will first explain a bit about the position of the Department for Environment, Food and Rural Affairs when emergencies such as this arise, particularly in response to the December issue. As my right hon. Friend the Member for Tunbridge Wells knows, water companies have a statutory duty to provide

“a supply of wholesome water”

under the Water Industry Act 1991, and must ensure the continuation of their water distribution functions during an emergency. Where the scale or complexity of an incident demands central Government co-ordination or support, DEFRA is designated as the lead Government Department for the water sector in England. As the lead Government Department, DEFRA is responsible for the planning, response and recovery phases for major disruption to water supplies, and also sets policy and produces guidance to ensure that water companies have appropriate emergency plans in place.

In December 2022, multiple critical incidents occurred across the country, which—as we have heard—were largely due to the fact that we had had that period of sustained cold weather for nearly two weeks, and a rapid freeze-thaw straight afterwards. The Environment Agency and many water companies gave warnings to consumers that that could happen. It led to an increase in mains bursts across the country throughout December, which increased the rate that water leaving storage areas, such as reservoirs, went through the system—that was part of the problem.

During the incident, DEFRA engaged with water companies in England to obtain accurate and timely updates on the scale, impact and response to those bursts, seeking assurances that the incidents were being resolved as swiftly as possible and impacted customers—particularly vulnerable customers—had access to alternative sources of water, such as bottled water. The prolonged water outages were experienced in Hampshire, East Sussex and Kent. Water supply was fully restored across all companies by 24 December.

Assurance and enforcement of the emergency response is overseen by the regulator, the Drinking Water Inspectorate—also known as the DWI—which has requested that affected water companies submit a follow-up report on their freeze-thaw incidents; those are known as 20-day reports. The DWI will then assess those responses and consider whether action can be taken where it is in its regulatory scope and in line with its enforcement policy. The Government fully support regulators in taking any appropriate action where necessary.

I will get back to South East Water. The data that we have heard about is absolutely stark. In 2021-22, 39,000 South East Water customers were without water for between one hour and 126 hours, and their average interruption in minutes per property is over an hour, at one hour, 12 minutes and 23 seconds. It is all accurately monitored. South East Water’s performance commitment at the start of the price review period was to achieve just six minutes and eight seconds of interruption time, so we can already see that things have gone wildly astray. It is the worst performer in the sector on this metric of supply interruptions.

My right hon. Friend the Member for Tunbridge Wells went on to refer to a “catalogue of failures”—not just the supply interruptions—and, looking back at the data, I cannot disagree with him. Let me make it really clear: South East Water must act urgently to significantly improve its performance for customers and address the issues that lead to loss of supply. While there may be particular geographical features, such as the lack of rainfall—everybody understands that we had a drought and reservoirs were low over the summer—which present challenges for the company, there is no evidence that South East Water faced worse conditions compared with other companies in the area that performed considerably better. I will not accept excuses for poor performance; trust me, I received some.

In relation to the specific incidents in Tunbridge Wells and East Sussex on 19 December 2022, a major incident was declared with approximately 18,500 properties potentially subject to loss of water supply, including 3,000 in Tunbridge Wells and 15,000 in East Sussex, in East Grinstead, Haywards Heath and Crowborough. We also heard about all of those affected in the constituency of my hon. Friend the Member for Maidstone and The Weald.

I had a great deal of communication with my right hon. Friend the Member for Tunbridge Wells and I thank him for getting in touch with the Minister so swiftly. The DEFRA team was already looking into the incident, but when I was informed I was able to raise other issues, particularly that of communication. On 21 December, I called an urgent meeting with David Hinton, the chief executive officer of South East Water, to discuss the response and to seek his assurances that the company would swiftly resolve the matter. I made it very clear that much better contingency plans had to be in place to prevent such widespread losses happening again.

In line with its responsibility as the economic regulator, Ofwat has written this week to all water companies, including South East Water, to ask them to provide a report by the end of February on their performance during the freeze-thaw period. The letter asks specifically what companies will do to improve the management of such incidents. Ofwat will assess the responses and take further action. That goes some way towards answering the question my right hon. Friend the Member for Tunbridge Wells asked about future plans, but I have also asked for a wash-up meeting with David Hinton to go over what happened, how the incident was managed, future contingency plans and wider performance. That will touch on my right hon. Friend’s question about the future plan.

I assure the House that Government and regulators take water company under-performance extremely seriously. As a result of missing its performance commitment targets between April 2021 and April 2022, Ofwat has directed South East Water to return over £2.8 million to customers in the 2023-24 reporting year, although the latest incident will go into the next year. The Drinking Water Inspectorate is also assessing the five events from November and December and considering whether enforcement action will be necessary.

The issue of compensation was rightly raised. In accordance with the guaranteed standard of service scheme, which is a set framework to assess what compensation should be offered, relevant customers in both constituencies will be paid compensation by South East Water by the end of January. Customers do not have to apply for that compensation, as it will be automatically triggered.

[Greg Clark]

I am grateful to the Minister for her response. I am pleased to hear that this important action by the regulators is taking place and that she has a meeting with the chief executive. In terms of the payments that are provided for under statute, does she agree that they provide a minimum, not a maximum amount? Providing it exceeds the minimum amount, the company is entirely open to make its own assessment. When there is a rolling series of outages over such a length of time, it is essential that not just the letter of the compensation provisions is abided by, but the spirit of them, in order to reflect eight days or more of disruption.

[Rebecca Pow]

I hear what my right hon. Friend says. There is a format for these payments: water companies must make a payment of a minimum of £20 for a household and £50 for a business when supply is not restored within the initial period—typically, 12 hours—and then a minimum of £10 for households and £25 for businesses for each 24-hour period after that. I hear what he says, however, and I hope South East Water has listened to this debate by the time I have my meeting with Mr Hinton. I also took my right hon. Friend’s point about whether water companies should consider some sort of wider community recompense. Obviously, that is for them to consider, but the point was very clearly made.

I have made it clear, and will make it clear again, that South East Water must act urgently to secure a resilient water supply for its customers. It is critical that it adapts its water efficiency programme to target customer demand. Its draft water resources management plan is currently out for consultation. It sets out how the company will provide a reliable and resilient supply of drinking water for the next 50 years. That includes investment of £2.2 billion for new supply infrastructure, and a further £2.1 billion for reducing leaks and customer water use. That consultation closes on 20 February, and I urge all relevant people to take part in it. It includes proposals for a potential reservoir at Broad Oak in Kent, desalination projects and a potential reservoir at Arlington or Broyle Place at Eastbourne in Sussex, so there are lots of proposals in there.

Before I finish, I want to turn to the action the Government are taking more broadly to improve water supply resilience. We have been very clear that water companies have to act to reduce water demand, alongside investing in new infrastructure. To achieve that, RAPID—the Regulators’ Alliance for Progressing Infrastructure Development—was set up by Ofwat in April 2019. It brings together teams from Ofwat, the Environment Agency and the Drinking Water Inspectorate to ensure we have a smooth regulatory path for strategic water resources infrastructure so that we can improve England’s resilience on water supply for the future. The national framework for water resources, which was published in 2020, sets out the detail of how we will improve water resilience in the longer term.

Water companies are investing £469 million in investigating some of these strategic water resources options, including inter-regional water transfers, reservoirs, water recycling and desalination. It is quite unusual that Ofwat, the economic regulator, has allowed them to devote that money to such investigations.

Our landmark Environment Act 2021 proposed new statutory water demand targets for water companies so that the water used per person in England is reduced by 20%. We recently published our consultation on mandatory efficiency labelling on appliances—showers, washing machines and so forth. That will be a really important step in our aim to reduce our personal water consumption to 110 litres per person per day. At the moment, it is about 143 litres, so that is a big change. We will need 25% more water than we are using today by 2050, so we need more infrastructure and we need to reduce the amount we use.

The Government are also working to support broader resilience. We have much higher expectations on water companies to retain their supply, fix leaks and improve performance. Ofwat has set stretching targets for all companies to reduce bursts by 12% and supply interruptions by 41% between 2020 and 2025. It has to be said that South East Water is not doing too well on its supply interruptions. In fact, it is the worst performer.

I hope I have made it very clear that if water companies do not achieve what is expected, the Government and regulators will take action. My right hon. Friend the Member for Tunbridge Wells and my hon. Friend the Member for Maidstone and The Weald raised some really important points and have put matters clearly on the agenda. We need to see an improvement.

Question put and agreed to.