Waste not, want not
March 04th 2008 Water efficiency doesn’t have to be a bad news story about droughts, climate change, rising bills, leaking pipes and an apocalyptic future.Consumers want safe, reliable water supplies.They want to be free to choose how much water they use, yet, at the same time, they are concerned about the environment. Water efficiency can play a valuable role in helping water companies to deliver what consumers want
Ofwat's aim is to protect consumers, promote value and safeguard the future. Our main way of doing that is by setting limits on the prices each water company can charge its consumers for the services it provides. As part of that process,we expect water companies to identify the most economic, sustainable strategy for balancing the supply and demand for water. They must consider a range of options, including measures to encourage consumers to use water more efficiently.
Waterwise, an independent body focused on reducing water consumption, rightly points out that water efficiency is about reducing waste rather than restricting choice. The less we waste, the less our water suppliers have to invest in new supplies to meet our demands.
That means lower bills and less risk of our rivers running dry in times of drought, so it’s good news for consumers and for the environment too.
Water companies have a vital role to play in promoting water efficiency.That’s an easier task when consumers see an immediate benefit from reducing waste. If metered consumers use less water, they pay a smaller bill. For unmetered consumers, the benefits of using less take longer to filter through to their bills.70% of households in England and Wales don’t yet have a meter. So, as companies prepare their investment plans for our review of price limits in 2009,they will need to consider what part metering can play in helping them to manage demand.
In the past, water companies had no incentive to encourage metered consumers to use less water. The less water that metered consumers use, the less revenue water companies receive. Granted, it costs companies less to supply less water, but the immediate cost savings are much smaller than the lost revenue. In order to address this problem, we are proposing to change the way that we set price limits. Under the new approach, we would adjust price limits to take account of differences between the amount of revenue that companies have received over the previous five years and the amount that we expected them to receive. The adjustment would be symmetrical, compensating them when revenue is lower, and clawing it back when revenue is higher. It should be a win-win for consumers.
If they use less water, they see an immediate reduction in their bill. And although price limits at the following five-yearly review will be higher to compensate the companies, those increases will often be offset because companies have to invest less to meet future demands. We propose to start applying this new approach in 2010, so from that point companies will have no disincentive to help their consumers save water and money.
As well as removing that disincentive, we have set the companies some water efficiency targets over the next couple of years. These targets will be voluntary, but we are working with the Environment Agency, Defra,Water UK and the water companies to develop mandatory water efficiency targets to apply from 2010.
If water companies are to meet these targets, and to persuade consumers to use water more efficiently, they must show that they are doing their bit to use water wisely too. Over the past ten years, water companies in England and Wales have reduced leakage by a third, saving enough water to meet the daily needs of 10 million households. That’s a tremendous achievement, but there is no room for complacency. We will expect water companies to continue to meet challenging targets to control leakage. Together with the Environment Agency, we are reviewing the scope for future targets to spur companies to become more efficient at controlling leakage. The more efficient they become, the lower leakage should be.
Less leakage, lower bills and a greater ability to tackle climate change - water efficiency looks like a good news story after all. More articles from OFWAT: | 
