Industry warning over sewer transfer

Water UK has warned the Government that the regulations on the transfer of private sewers will not be approved in time to allow them to make the necessary preparations for a successful transfer. The utilities' representative body has written to the Secretary of State pointing out that if the regulations on the transfer of private sewers are not presented by the end of May, it will not be possible for companies to meet the 1 October deadline for the transfer.

Water UK says that the continuing uncertainty about whether or not these regulations will be approved in time are already causing companies considerable difficulties. Thames Water chief executive, Martin Baggs, has warned that water company reputations could be put at risk by private sewer transfer.

"One of the things I'm really concerned about is the reputation of our business overnight if we have to adopt a failing system," he revealed. According to Baggs, (see full interview, Page 14), another challenge is tendering.

"We could be dealing with another 200,000 blockages a year," he said. "We're running a tender process to engage the market, but it's very difficult for us. It's like tendering for a contract when you don't actually know the size of the contract you're tendering for."

He highlighted the risk to jobs among the smaller contractors: "You've got some really good companies out there, doing a really good job," Baggs said, but added that the trend would be towards larger contracting arrangements, with flexibility built in.

Baggs said it made sense to join up the responsibility for the network, he identified unanswered questions surrounding the switch. Alongside asset management and maintenance, areas of the business such as customer service and IT would also be impacted but, not knowing the condition or scale of the asset base, Baggs said it was difficult to determine the staff and other resources required.

He warned: "The frightening thing is that the transfer date is the first of October, the regulations to enable that haven't even been distributed for consultation."He described a "war room" at company headquarters in Reading, plastered with diagrams and plans, mapping the anticipated 40,000km addition to the 60,000km network. Decisions are still needed on who will undertake contracts to maintain the new infrastructure. He expressed concern that private sewer transfer was "a big issue" for Thames Water customers and for the utility's investors.

"These costs aren't built into our funding at the moment," said Baggs, "and they're not built into customer bills. Now the regulator wants us to demonstrate those costs as actual costs before we put any applications in to recover those costs.

He warned that customer bills would be hit at the end of AMP5 to cover expenditure of previous years: "So you'll see a big increase in the last year, then you'll see a drop off to customer bills in the following year. To me that cannot be the right thing for customers."

Baggs added: "Even if the regulator took our lower estimates, at least that would give us some idea of the direction we're taking on this. This will cost us millions of pounds this year, just to prepare for it, even before we implement it."

Speaking at an All Party Parliamentary Water Group meeting on 29 March, Ofwat chief executive Regina Finn said that robust information would be required by companies wishing to discuss an interim determination.

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