Water Bill

Lord Redesdale Excerpts

Monday 27th January 2014 Lords Chamber

[Lord Redesdale (LD)]

My Lords, along with the Minister, I have to declare an interest in that I own one bank of a river: the River Rede in Northumberland. The river, which runs through Redesdale, has a name that deals with some of the pollution problems there: in Northumbrian it means “red river”. That is probably from the iron oxide that has leached into it, but I prefer the definition given in a local history guide which says that it ran red with the blood of Scotsmen after the Redeswire massacre in the 1560s. However, that strays into another Bill that we will come on to in the not too distant future.

As a Back-Bencher I enjoy the fact that you can focus on one issue alone. This Bill is quite light on issues. I will not be focusing on many other parts of the Bill, but I would raise the issue of competition. Many noble Lords have talked about the value of competition in driving down prices and, as the Scottish example has shown, there could be short-term gains through competition. However, we should take on the lessons learnt from the energy sector that the short-term gains might turn into very long-term problems, especially with the issues of extraction.

An area that I particularly welcome in the Bill, though, is the Government pushing forward issues around the capex and opex problem and introducing the new word “totex”, which is quite an ugly expression but certainly may well help to deal with some of the fluctuations brought about by the five-year AMP cycle.

The issue that I want to focus on particularly was flagged up in the White Paper as one that the Government were going to look at under concern, but that dropped out of the draft Bill: the question of whether there should be a duty on Ofwat in sustainability. Having watched the pictures of flooding on the television this morning, and I think that everyone who has ever dealt with a flood knows just how horrendous that situation can be, I cannot believe that we do not face an issue with climate change. We were facing a drought last summer. They said, “If we don’t get a 200% normal rainfall pattern, we will have to have hosepipe bans through the whole of 2013 and 2014”. Luckily enough, we had over 200% of normal rainfall. Perhaps it is only me who thought, “Over 200% of normal rainfall is not a normal situation”. Now, of course, we have gone from drought to a flood. With climate change, drought and flood are two sides of the same coin, and we are going to face that in future.

The Minister and the Government have come forward and said, “We don’t need the word ‘sustainability’ as a duty because we’re looking at resilience”. I believe that there is a massive difference in how people view the terminology between “resilience” and “sustainability”. Sustainability is already written into the Bill—there is a clause on sustainable drainage—but not as a duty for Ofwat. Why do I believe that that is important? Because the regulator sets the terms of the tariff that we pay and therefore what the water companies can use that money for.

Unless the regulator takes looking at sustainability in the long term really seriously, we tend to end up with a much shorter-term decision-making processes. Of course, when we are talking about the long term, we are talking about only 20 years, or perhaps even less in some of the assessments. I plan to be a water customer in 20 years’ time—with my family history, I probably will not be—and it is quite possible that as a customer in 20 years’ time, I will be paying a much higher bill because of the decisions we are making now about the cost of living. When we talk about the squeezed middle classes, I understand that water bills are going to be higher. However, if we do not take those measures, the cost of water in a few years’ time will be a great deal higher.

The one issue I have is that much of what has gone in the White Paper is business as usual: “We have always had a lot of water. Water is fine. We can deal with it, and there will not be a problem”. That is not really the case. I manage a private water supply—I have a borehole—and it focuses your mind on some of the problems with water. One of the major problems with water is the cost of extraction. The cost of extracting water through a borehole is very high in energy. Of course, water companies are some of the highest users of energy in the country, so when we are talking about price sustainability, we also have to think about how much it will cost us in energy terms, and energy prices are going up quite dramatically.

We also have to think about the fact that we tend to forget that the price covers not just the extraction of water but the treatment of sewage. Dealing with a blocked septic tank on a freezing cold Sunday morning in December focused my mind on the problems of sewage on a personal level. We should realise that as much energy is used in getting clean water to us as is used in dealing with sewage and reprocessing the water.

We have to make sure that the water companies understand that sustainability is an issue. That is where I have a slight disagreement with Ofwat. Ofwat has a secondary duty of sustainability, not a primary duty. Many noble Lords have talked about the regulator’s sustainability duty, but it is secondary to economic regulation and means that sustainability has not been as important. The issue is slightly more important now because there is a real problem with which duties are undertaken by which regulatory authority. In Committee in another place, the constructive tension between the environmental regulator and the economic regulator was referred to as leading to an optimal outcome in the periodic review process. The noble Lord, Lord Whitty, indicated that that might have been the case in the past; however, the Environment Agency no longer has a policy role and, while it gives guidance, it relates to statutory duties and it no longer actively promotes an environmental agenda with water companies. At the same time, the Environment Agency has been given a duty to promote economic growth. No commensurate duties or functions have been placed on Ofwat. This means that the creative tension really no longer exists.

A resilience duty is good for resilience—and I stress that I do not underestimate the importance of a resilience duty—but it does not by default mean that it is an environmental duty. Waterwise and other green NGOs feel that there needs to be something stronger, such as a primary sustainability duty on Ofwat to ensure that issues such as water efficiency and catchment base solutions, which have been mentioned by many noble Lords, and energy management come to the fore.

An issue that often gets overlooked and was always overlooked in the energy debate is that it is no longer business as usual. We are going to have to change our habits in relation to water. We will have to start thinking about water efficiency. We are one of the highest users of water in Europe. We waste potable water—drinking water—by washing our cars with it. That water has an energy cost that has been processed and an environmental cost. We are going to have to start changing fundamentally how we look at water efficiency. A water efficiency duty placed on Ofwat would be a start to meeting that sustainability agenda. The water companies already have a water efficiency duty placed on them, but the water regulator tells them how they can spend their money. If they are to change their attitude, then we have to change the attitude of the regulator. There would be a question as to whether that should be through a primary duty on sustainability, or a primary duty of water efficiency and energy use. That argument is yet to happen, and I would very much hope that the Minister will look at it.

This issue really has to be taken seriously. We could be facing a hosepipe ban now due to the drought of 2012. We are going to see a great deal more of this flip-flop between flooding on the one hand and drought on the other. I do not think that hosepipe bans are going to be the worst of our problems. When we go back to standpipes we will have a real issue. I hope that this could be looked at. I first started having this argument with Ofwat a number of years ago. One of the problems is that nothing moves quickly in the water sector. The decisions we make now will have fundamental implications for the future of the water industry. I very much hope that the Government can look favourably upon a sustainability amendment and, if not that, upon a water efficiency duty—I understand the reliance duty incorporates issues of climate change—and an energy duty. If not, I would feel that that had to be imposed upon the Bill.