Water Bill

Earl Cathcart Excerpts

Thursday 6th February 2014 Lords Chamber

[Lord Curry of Kirkharle (CB)]

My Lords, I, too, thank the Minister and the department for the very helpful briefing notes we have been given, and for the opportunity to explore the Bill with him and his team. I fully endorse the comments of the noble Baroness, Lady Parminter, on Amendment 133. I also firmly support the noble Lord, Lord Oxburgh. I declare an interest in that I chair the management board of a rural estate that has an extraction licence.

At a time when the management of water is such a critical issue, I would go even further than this amendment. I think that a timetable should be set, by which time all consumers of water are charged for the volumes they use. These amendments mark a step towards that objective. I cannot understand the reluctance to expand the use of water meters. I know that there is an installation cost involved and that it will take time. The potential costs of installation could be fairly significant, as the noble Lord, Lord Oxburgh, pointed out, and of course meters have a limited life and will need to be replaced over time. However, these costs need to be set against the fact that metered customers use between 10% and 15% less water. Some will use more and some less, but the overall net benefit of a saving of 10% to 15% is massive.

The current policy of allowing companies to apply for the right to install water meters in areas of water stress has a certain logic. However, we have seen vividly over the past two years the dramatic impact of extreme weather events, whether they are the result of climate change or whatever. Flooding in winter and drought in summer could become much more frequent occurrences than has been the case historically, and water stress could become a reality well beyond the south and east of England. Even using the existing definition, we are likely to see a requirement for increased water use. Better, I would suggest, that we should extend the option of charging now in anticipation of the inevitable pressures on supplies, as mentioned earlier by the noble Lord, Lord Redesdale.

I come back to the issue of managing water. The well-known maxim, “If you can’t measure it, you can’t manage it”, seems to apply very precisely to the subject of water. As I have mentioned, I chair an estate. We are now well advanced in the process of installing meters in every household and enterprise across the entire estate. We know where every litre goes and we can charge appropriately. We are also able to monitor, remotely in the office, how much water is being used, where and by whom. It is very effective and much more efficient. The water industry needs to become much smarter in its management of water, and measuring is essential. I understand that Anglian Water now has around 90% of its customers metered, not through compliance but because it makes sound economic sense. Other companies, particularly in the freed-up market that we are trying to achieve through this Bill, need to be encouraged to do the same.

I would like to make one final point. It costs all of us £14 every year to cover the costs of unpaid water bills. It is a fact of life that if we do not appreciate the value of water, we are likely to be much more indiscriminate in our use of it. We should take the opportunity in this Bill to further establish the principle of charging for water use. The Walker review, which has already been mentioned twice, firmly endorsed this approach, and I hope that the Minister will give this proposal his serious consideration.

[Earl Cathcart]

My Lords, when preparing to speak to this amendment, I was going to support the amendment of the noble Lord, Lord Oxburgh, but having listened to the debate so far, I find myself supporting both amendments. I support in particular the part of the amendment tabled by the noble Lord, Lord Oxburgh, which states that,

“the Secretary of State shall be authorised to allow metering … in areas where metering might generate other social benefits”.

I was talking to somebody outside who, on asking what I was doing here and learning that I was involved in the Water Bill, said that they were on the board of a water company, which had been stopped by Ofwat when it tried to roll out meters across its area. I hope that I have this right—listening to the noble Baroness, Lady Parminter, I think that I have—but the reason was that the company was not in an area of water stress. This seems unbelievable. If true, and I have no reason to doubt it, what gives Ofwat the right, or the power, to stop the rollout of meters when we all recognise the advantages that we have talked about, such as reducing demand, cutting costs for consumers, promoting fairness et cetera? If Ofwat has that power, what are the Government going to do to—I was going to use the word “curtail”, but let me use the word that the Minister used in a previous amendment—amend Ofwat’s powers in this regard?

[The Earl of Selborne]

My Lords, I am sure that the Minister will help my noble friend Lord Cathcart, but the short answer is that, unless a water company is operating in an area of water stress, it needs the Secretary of State’s permission to introduce a universal metering programme. As the noble Lord, Lord Oxburgh, has pointed out, that is an unhelpful provision. I am sure that we all agree that, if we could move faster on metering, we would see some of the long-term objectives of the Bill delivered much more quickly.

The White Paper, Water for Life, to which we referred so much at Second Reading, gave one every encouragement that the Government would be promoting universal metering. It points out how universal metering changes our attitude to water, as the noble Lord, Lord Curry, has reminded us. Metering helps you determine where the leaks are, particularly when they are within your property—you suddenly take a great deal of interest when it is going to be reflected in your bill as opposed to that of society as a whole. It allows you, without in any way raising the spectre of de-averaging, to introduce all sorts of innovative incentivisation such as summer schemes, where you pay more on a summer tariff than on a winter tariff, and water reduction devices.

All these measures can and have been achieved once universal metering programmes have been introduced. In the Southern Water area, because we are a water-stressed area, these measures have been introduced and the water industry is looking with a great deal of interest at a number of the lessons which have been learnt from this programme. It is clearly correct that water use goes down. That is the first and most important message, but as the probing amendment of the noble Lord, Lord Oxburgh, points out, there are many other societal benefits. It is a no-brainer and we need to go for it.

[Earl Cathcart]

I thank my noble friend for correcting my wrong conclusion that the power lies with Ofwat. I should probably change my question to ask what the Secretary of State is going to do to change his attitude in this regard.

[Baroness Northover (LD)]

My Lords, I thank the noble Lord, Lord Oxburgh, and my noble friend Lady Parminter for tabling these amendments, which give us an important opportunity to discuss the role of water meters. In many ways, the debate follows on from the comments of my noble friend on water efficiency in the context of sustainable water supplies, which is the context in which noble Lords have addressed these amendments.

I will take the comments of the noble Lord, Lord Oxburgh, on codification and simplification back to the department. I noted that, as he made those comments, the noble Baroness, Lady O’Neill, with her wide experience was nodding behind him. Noble Lords are very good at holding the Government to account in this regard, and so they should.

I will start by laying out the Government’s position in relation to water meters. We are seeking to strike a careful balance. I note that noble Lords feel that we have not struck the balance quite correctly, but I will outline our position. We agree that meters provide a fair way to pay and we want companies to do more to promote metering to those who would benefit. However, we are also conscious that universal metering could lead to increased bills for some struggling customers, which is a point that the noble Lord, Lord Curry, referred to. I thank him for noting that, even if he then went on to say that he did not really agree with it. That is why we do not wish to impose a blanket approach to metering across the country.

This balance reflects the current legislation. Section 144A of the Water Industry Act 1991 ensures that any customer can request a meter from their water company. The company must then fit a meter, which it does free of charge. All the companies also allow their customers a cooling-off period of one year should they wish to revert to paying according to rateable value. As a result, there is a permissive position there. On the very rare occasions where fitting a meter would be disproportionately costly, the company offers an assessed charge, based on an assessment of the water actually used by that household.

However, Section 144B restricts the power of water companies to impose universal metering across all of their household customers, which is the issue that we are addressing here. There are circumstances, as noble Lords have noted, in which this restriction does not apply, which are set out in the Water Industry (Prescribed Conditions) Regulations 1999. For example, companies whose areas of appointment have been designated by the Secretary of State as areas of serious water stress—based on advice from the Environment Agency—may impose metering. They may also do so where the household has particularly high water use for a number of specified reasons, such as filling a swimming pool.

As my noble friend indicated, the purpose of her amendment is to add another reason to allow unrestricted metering. That would allow all water companies to meter all their customers, if they considered that this would enable them to meet their statutory duty to supply water or their statutory duty to promote the efficient use of water. About 41% of all homes already have a meter, and we expect this to rise to 50% by 2015. Anglian Water and South West Water already have 70% metering. A number of companies in areas of serious water stress are in the process of rolling out universal metering or have plans to do so. These include Southern Water, Thames Water, Sutton and East Surrey Water, Affinity Water and South East Water. Noble Lords have made a powerful case for why these developments are taking place.

However, we must recognise that the costs and benefits of metering vary from region to region. The evidence suggests that benefits on a scale that outweigh the costs of metering will only be found in areas where incentivising reduced water usage is of critical importance—that is to say, water-stressed areas, where universal metering is already a possibility. As I have noted, we are concerned that there are costs associated with implementing universal metering, which are funded through the bills of all customers in the region. We have always been clear that, with climate change and population growth, the case for universal metering may change, but it may do so at different times for different areas.

The amendment of the noble Lord, Lord Oxburgh, would ensure that the Secretary of State has powers to allow metering of water supplies in areas that are currently or may become water stressed and where metering may generate other social benefits. I confirm that the Secretary of State already has these powers. He has the power to issue the prescribed conditions regulations, as I have already mentioned. For example, at present under the regulations, water companies in areas classified as seriously water stressed must evaluate whether compulsory metering is the most effective way to address their supply-demand balance alongside other options when preparing water resource management plans.

The Secretary of State recently asked the Environment Agency for updated advice on the designation of serious water stress. The new methodology defines serious water stress as occurring in areas where either the current household demand for water is a high proportion of the rainfall which is available to meet that demand or the future household demand for water is likely to be a high proportion of the rainfall available to meet that demand.

The Secretary of State already has the power to revise and reissue the prescribed conditions regulations—clearly, my noble friend Lord Selborne knew that—but I assure my noble friends Lord Cathcart and Lord Selborne that we hear what they say in this regard. My right honourable friend the Secretary of State would of course revise and reissue these regulations if he believed that allowing universal metering to be rolled out in a larger number of areas would lead to social benefits. We will keep these regulations under review. However, as I have said, I have already set out that at present we consider that the existing regulations strike the appropriate balance.

I heard with great interest what the noble Lord, Lord Oxburgh, said about smart meters and his other proposals. In relation to the installing of meters, restrictions on the power of companies to charge by meter do not extend to their power to fit a meter. Any company may do that and some, such as Anglian Water, have a policy of doing so for the reasons that the noble Lord laid out. We recognise fully the important role that water meters can play. I hope the fact that I have been able to spell out in more detail the Government’s position on this has assisted noble Lords and that they are willing to withdraw their amendment.