Flooding on the Somerset levels

Photo: King's Sedgmore Drain

The Somerset levels are a totally man made environment. They were first extensively drained by the Church back in the early 17^th century with the help of a Dutch drainage engineer. The clue is in the name of the water course’s like the King’s Sedgmoor Drain. Most of the levels are below sea level (although with a tidal range of 11m defining sea level is interesting). All year round water is pumped from the levels into the man made rivers (or drains) that are designed to store water and allow it out at low tide.

It’s a surprisingly complex drainage system that was managed successfully by local drainage boards comprised of local farmers and land owners. Now responsibility has been transferred to The Environment Agency who promptly decided to save money and for the last 10 years halted the year round work of dredging the rivers. As the head of the local drainage authority said this week, “it was a totally avoidable flood”. Just look at Holland, there has been no severe flooding there this winter.

With the drains being higher than the surrounding land, having allowed the water to spill onto the farm land there is no way to get it back except by pumping. But with 12% of Somerset under water the volumes involved are colossal.

Local knowledge is vital but this is being lost. The blog’s author lives on the levels. The local farm was in the same family for three generations. Unfortunately the next generation did not want to continue farming so it has been sold. The farm has now been split up and has about 20 owners. Some of the land was bought by home owners looking to extend their gardens, another part is now a horse stud, while other fields are let to tenant farmers. Many of the home owners don’t understand that their ditch is actually called a Rhyme and a vital component of the complex drainage system. The problem is who now takes responsibility for ensuring dredging of the ditches happens? It needs every one of the 20 plus land owners to dredge their ditch or else the water can’t flow. This situation is a microcosm of the challenges being faced across the country.

Routine maintenance is not ‘sexey’. It is an on going cost rather like painting the Forth Road bridge. It is too easy for dredging to be the first victim of cuts especially where the local management and ownership has been lost. Initially stopping dredging may have no impact but eventually the inevitable will happen. Until this issue is recognised and a holistic approach taken – flooding is inevitable.    

Investment in the UK water industry

Photo courtesy of Thames Water - mains replacement in London

Drivers for investment in AMP6 (2015-2020) is the theme of the blog this week. 

The Water Framework Directive is driving massive investment as a better understanding of each water basin develops. Nutrient input especially from phosphates is proving a bigger problem than anticipated. Already many sewage discharges have a 1mg/l consent especially in slow moving rivers. This can be achieved relatively easily by using a tertiary treatment process usually involving chemical dosing (typically ferric chloride) to precipitate out the phosphate. However in some water courses the Environment Agency is suggesting discharge consents may need to be an order of magnitude lower 0.1mg/l. This poses a significant technical challenge – several processes are currently being trialled usually involving a combination of enhanced tertiary filtration and chemical dosing but as yet no clear winner has emerged.

Despite the recent extremely wet weather concerns over water leakage has not eased. The issue is the rising population and changes in lifestyle that is increasing water demand. This is despite the moves by water companies in the particularly water stressed South East regions to install water metering for everyone. Several water companies are proposing huge new reservoirs (Bristol Water for example at Cheddar). The Environment Agency recognises that winning public support is difficult when water losses are still averaging over 24% across the network. Virtually unchanged over the last 10 years.

Some new technologies are emerging to detect or manage water losses especially some sophisticated software systems to improve the monitoring of the distribution network. A few countries have got leakage down to about 5%. This has been achieved through a combination of investment in new distribution mains, extensive metering through the distribution system and tight control of water pressure to minimise the stress on pipes and leakage if a pipe does break.

Environmental drivers for investment in the water industry

With the next regulatory period (AMP6) for the water industry starting in 2015 over the next few articles the blog will look at the main drivers for investment.

Improving the environment is one of the major drivers accounting for about a quarter of the capital spend (£25bn over last 25 years). This is led by the Environment Agency who via their National Environment Programme set out what they expect from the water companies in PR14. The Environment Agency is looking for water companies to reduce flood risk and meet the challenges of growth, development and climate change. They expect that in AMP6 they will see improvements in bathing water quality, catchments moving towards ecological status, secure water supply and no deterioration in the current quality of the environment.

This means that significant investment will be needed in a number of areas:

o   Compliance with all licences and permits

o   Reduced serious pollution incidents

o   Sustainable abstraction

o   Reduced sewer flooding

o   Tackling water leakage

Surprisingly Eels are the cause on one significant area of investment. European eel stocks are at an all time low and the EU has introduced new legislation (Eel Recovery Plan) that the UK must implement. One of the problems is allowing the passage of eels past river water intakes. This will require significant investment in the design of water intakes and their screens to stop the eels being sucked in. It will particularly affect the water only companies.

Reducing water over abstraction is another massive area. Currently 3.3% of all water comes from rivers suffering from over abstraction. Eliminating this will mean a mixture of developing alternative water sources and managing demand.  

Water - is it value for money?

Photo: HPH plant for sludge treatment

It is inevitable that the financial structure of the water industry will again come under the spotlight this week with File on Four (Radio 4 Tuesday 8pm) focussing on the water industry. The cost of capital is one critical factor in the financing of the water sector. More than two decades ago the water industry was privatised to solve the issue of chronic underinvestment and the constraints of short term Government funding. It has been a huge success in that it has enabled about £100bn of capital investment over the last 25 years.

But it has come at a price - water bills rising significantly above the rate of inflation. Water bills have now risen to the extent where politicians can no longer ignore the impact on household expenditure. When Ofwat was established its primary duty was to scrutinise the investment plans of the water companies to ensure what they were proposing was reasonable and then to ensure they could finance the investment and remained viable businesses. There was no duty to minimise prices for customers. It is inevitable that with any regulated industry overtime the regulator and water companies develop a close working relationship. The question is has the regulator been sufficiently rigorous in ensuring the best deal for customers as well as the water company’s investors?  

One way to judge this is whether new investors find the water industry an attractive investment opportunity. Here the answer is undoubtedly yes. The water industry is very low risk. Unlike a ‘normal’ business the water companies have a fixed customer base as each is still a monopoly (for domestic customers) and the prices they can change are not fixed by the market but by the regulator. With the long term steady income stream that water companies can provide they have been a very attractive investment opportunity for pension funds. The key question is whether the pendulum has swung too far in favour of investors rather than customers?