Water Conservation and Demand Management

1

• Water Conservation and Demand Management
• Mark Hann
• Head of Comparative Efficiency - Ofwat
• Monitoring Leakage and Water Efficiency Plans

2

• History of monitoring leakage by Ofwat
• Setting leakage targets - process and
  calculations
• Tripartite Study PR04
• Thames Water
• Ofwat requirements/expectations for water
  efficiency plans
• Results of annual water efficiency monitoring
  reports

3

• Monitoring Leakage
• Leakage has always been reported to Ofwat
  annually in JR
• Focus on water delivered rather than
  unaccounted for water (report 26)
• First public statements in June 1992

4

• Water delivered report 1990-91 (published Jun 92)
• Explained Ofwat policy
• League tables (anonymised results)
• Regionally grouped
• Focus on methodology and data quality

5

• In the report the Director General indicated that
  water delivered to customers would form a key
  output measure for monitoring performance of
  customers
• Previously water into supply had been key measure

6

• Data quality in 1991
• 18 companies were unable to assign a confidence
  grade to water delivered, 5 more assessed it as
  needs improvement or worse
• probably an over optimistic assessment

7

• By the next year we had moved from drawing
  attention to data quality and were discussing the
  best way to express leakage
• We decided that per unit length was better than
  of distribution input but explained that this
  favoured rural companies

8

• Later in 1992 published Cost of water delivered
  to customers 1991-92
• No league tables but attributable results on
  leakage

9

• Made some comment about leakage economics
• ...would not be in the interest of customers to
  attempt to push leakage control beyond the point
  where additional costs of control equal the extra
  benefits that result

10

• And
• Companies should have due regard to the costs of
  water lost and make an appropriate decision about
  the spending required to control leakage
• principles founded in report 26 issued in 1980

11

• In 1993 report on cost of water delivered started
  to draw attention to the water delivered
  components and the variation inherent
• PCC
• unmeasured non household use
• supply pipe leakage
• meter under registration

12

• Explained that we were interested in leakage
  because
• Ofwat has responsibility to ensure that companies
  are efficient in their use of water
• Comparative efficiency studies depend on
  realistic estimates of supply pipe leakage
• An equitable tariff balance can rely on estimates
  of supply pipe leakage

13

• Went on to use the term Economic Level of
  Leakage
• Then said that because ELL varied with local
  costs and system condition we did not set leakage
  targets
• Report moved away from per Km measure to litres
  per property

14

• Report did not comment on comparative performance
  on leakage but raised some concerns about pcc
  variance
• The next years report (1993-94) carried on in
  the same theme - encouraging the adoption of MLE
  methodology on leakage

15

• By the following year it was clear that there
  were public concerns about leakage levels
• Ofwat said that it would not expect to push
  companies below ELL as this would impose costs
  and looked to other methods of conserving water

16

• Ofwat was now encouraging companies to develop
  consumption monitors (like Severn Trent)
• Recommended reconciliation of night flow and
  integrated flow leakage results
• Pointed to some reasons for differences in
  leakage figures - but still no naming and shaming

17

• At the same time as all this the hot summer of
  1995 was causing problems
• Yorkshire was tankering water
• Companies were using drought orders to obtain
  more resources
• Hosepipe bans and drought orders were used to
  restrict consumption

18

• The traumatic events of the summer resulted in
  Ofwat publishing a special report Leakage of
  Water in England and Wales in May 1996
• For the first time there was direct criticism of
  specific companies
• Companies were told that they should set and
  publish leakage targets that were acceptable to
  Ofwat

19

• In the following year (October 1997) Ofwat
  published its first annual report specifically on
  leakage and water efficiency
• More use of league tables
• More specific criticism of individual company
  performance
• Leakage targets published for the current and
  following years

20

• During the same year (May 1997) the new
  government convened the water summit
• Stressed the importance of reducing leakage and
  improving the efficient use of water
• Ten point plan

21

• Companies to promote water efficiency with
  vigour, imagination and enthusiasm
• Companies to consider role in Government
  Environment Task Force
• New water regulations will take water efficiency
  into account

• DG will set tough mandatory leakage targets
• Free leakage detection and repair for domestic
  supply pipes
• Companies to get statutory duty to conserve water
  in carrying out their functions

22

• Government will review RV charging, disconnection
  policy and metering policy
• Companies to accept licence amendment to allow
  drought related compensation

• Companies should publish data on leakage and
  water efficiency performance
• Government will review abstraction charging
  regime to ensure environment given full weight

23

• Since 1995 progress has been more obvious - some
  debate over the reasons for the enhanced
  performance
• Drought brought home to most companies the
  inertia of leakage improvements
• New era of economic and political realism
  combined with enhanced technology

24
Leakage achievements since 1995
25
Political comment

• This is great news for customers
• This is impressive progress. I want to go
  further, helped by more innovation and better
  technology. I look forward very much to working
  with the regulator, the water industry and
  customers to achieve this.
• John Prescott - August 2000

26

• Continue to monitor leakage through June Returns
• Publish out-turn in a press notice issued in
  early July
• Contains results and current targets
• Details of regulatory action

27

• Setting leakage targets
• Closely linked to ELL analysis and SDB situation
• 2001-02 targets now in place are no longer
  mandatory where a robust ELL exists
• Maintain incentive to produce robust ELL

28

• First targets published in May 1996
• Mandatory targets set out for the first time in
  October 1997 for the 1998-99 year - a 16
  reduction overall
• Targets based on supply position and actual
  leakage level

29

• Process for target setting is to discuss the
  Ofwat proposals with EA and DETR before sending
  them in draft to companies
• 1996 saw first robust Economic Level of Leakage
  appraisal (Yorkshire Water)
• Ofwat began to set targets with reference to
  robust ELLs

30

• Aim was to get Companies to ELL by end of 2002-03
• After this expect general downward trend because
  of
• Technology improvements
• Reducing costs
• Growth in demand

31
Aim was to get Companies to ELL by end of
2002-03. Progress so far...
32
More on Thames later.
33
What happens post 2002-03?
Ofwat would like to leave leakage management to
the companies - incentive regulation Taking a
medium to long term view Need a solution that
satisfies all stakeholders Companies Regulato
rs- Economic and Environmental Politicians Cus
tomers
34
The Tripartite Study

• Jointly funded by Ofwat, DEFRA and EA
• Let to WRc
• Main objective to consider how companies should
  undertake a fully integrated appraisal of the
  financial, social and environmental aspects of
  their leakage reduction and other operations to
  ensure the efficient use of water resources now
  and in the future by all abstractors.
• Industry participation has been important

35
Tripartite study outcomes

• Published March 2002
• Recommendation of how to produce a best practice
  ELL
• Recommended list of Leakage performance
  indicators
• A discussion of alternative target setting option
• 12 week consultation period underway

36
Approach for PR04

• Results of consultation will be published in this
  years leakage report (having a new focus on
  supply / demand)
• PR04 treatment of leakage will be based on the
  Tripartite study results
• Leakage economics will be focused at the zonal
  level
• Consistent with a holistic supply demand approach
• ELL guidance will appear in the draft Business
  Plan guidance this Autumn

37
Criticism so far...?

• Insufficient consideration given to Alan
  Lamberts ILI approach
• Although a useful comparative tool this is not
  the best solution for regulation in England and
  Wales
• ILI compares performance against a benchmark
  based on best practice
• ILI does not deal with actual need for water
• We are dealing with actual levels of leakage in
  terms of a need to balance supply /demand in an
  economic climate

38
Summary

• Tripartite study conclusions will feed into PR04
  in terms of supply/demand and leakage assessments
• Leakage and supply/demand are indisputably linked
• Company submission on both issues must be wholly
  consistent

39
Thames Water

• Concern about leakage at Thames for many years
• Highest leakage in industry and now rising
• Thames could not explain 7.2 of its water put
  into supply
• Thames also has security of supply problems in
  London

40
Thames Water cont...

• Thames argue it has a uniquely tough operating
  environment
• Leakage control is not necessarily the most
  efficient way to deal with its security of supply
  problem
• The increasing water balance imbalance is due to
  increased demand not just rising leakage

41
Thames Water... The Agreed Steps

• Develop a robust ELL assessment and achieve it by
  2003-04
• Establish a robust water balance for the whole
  company
• Implement an acceptable resource plan to achieve
  target headroom by 2003-04 (and maintain it)
• All of these are inextricably linked

42

• Leakage summary
• Evolution of current regulatory practice
• Origins of leakage targets
• Regulatory process now
• Future of targets

43
The efficient use of water
44
History

• Duty to promote efficient use of water introduced
  in 1996.
• We approved companies initial strategies in
  April 1997.
• Annual monitoring of companies through the June
  Return process
• analysis published annually in leakage and
  efficient use of water report

45
History (contd)

• Companies submitted five-year Water Efficiency
  Plans in July 2000.
• We published assessment in RD7/01, May 2001.
• NAO Report on Leakage and efficient use of water,
  December 2000 concluded that
• progress made in offering advice, free metering,
  free supply pipe repairs and water saving devices

46
History (contd)

• noted uncertainties over savings
• need for sharing of information/research.
• PAC report indicated that
• Ofwat should identify the most effective
  efficient use of water measures

47
Five year plans

• We advised that plans should specifically set out
  strategies on
• cistern device provision and use
• household information, especially self-audit
• advice for institutions and schools
• long-term educational strategies.

48
Compliance Criteria

• We use four criteria in assessing companies
  compliance with statutory duty
• is there an efficient pricing framework?
• is there a long-term education programme?
• is company activity economic?
• is promotion directed to those customers who
  benefit most?

49
Five year plans (contd)

• Overall satisfied - all companies meet acceptable
  minimum
• Only some have really taken a strategic approach
• Want companies to set efficient use of water in
  context of overall supply/demand balance
• Different levels of activity appropriate for
  different companies.

50
RD7/01 - Main points

• Emphasised that efficient use of water is a
  long-term activity.
• Attitudes may take time to change.
• Further work is necessary to clarify costs and
  benefits of efficient use of water
• UKWIR project on best practice in measuring
  savings
• companies also expected to do their own research.

51
RD7/01 - Assessment of plans

• EA and WaterVoice regions (previously CSCs) given
  opportunity to comment
• Assessment took into account
• supply/demand balance
• scope for further leakage reduction
• level of activity in recent years
• different levels of activity appropriate for
  different companies.

52
2000-01 Report

• Published Wednesday 10 October 2001
• Key messages
• We focus on water companies activity
• We expect a minimum level of activity from all
  companies
• We expect companies to focus on what works best

53
Twin track

• Key element in maintaining SD balance
• Demand Management options need to be equitable
  with supply options
• Reproducible, transferable, accurate, robust,
  cost comparable and sustainable

54
What are we doing now?

• Working with the industry to improve
  understanding of cost-effectiveness.
• UKWIR study
• Water UK and EA Water Efficiency Awards
• Revising JR01 guidance.

55
UKWIR - Best Practice in Measuring the Effects of
efficient use of water Measures
Phase 1 Framework for best practice, 10
criteria

• 1. Project management
• 2. Study approach
• 3. Monitoring period
• 4. Sample size
• 5. Sample composition
• 
  

56
UKWIR - Best Practice in Measuring the Effects of
efficient use of water Measures / continued..

• 6. Control sample
• 7. Data collection
• 8. Data analysis
• 9. Audibility
• 10.Statistical analysis

57
Next steps

• UKWIR to report on conclusions
• Ofwat leakage report to be issued (Oct 02)

58
Finally

• The remaining big issues are
• Thames leakage
• Political views on UK leakage
• PR04 Business plans - balancing supply and demand