Fathoming out your wastewater bill
How do you calculate effluent charges? Why are they different around the country and what on earth is the Mogden Formula? Dr Stephen Etheridge and Dr Ulrike Leroff, Environmental Biotechnology Ltd, explain.
The new financial year always brings new burdens and surprises to industry, some of which remain obscure until they hit the doorstep. In the case of Trade Effluent charges this is not usually until October when the new annual rate is felt for the first time.
It is no consolation to be told by the local water company that the new charges came into effect last April and that they should already have been budgeted for. Many managers will be reaching for their calculators to fathom out how the new charges are calculated and how they affect their businesses around the country.
The two key publications in this area (see end of article) are not normally published until late autumn, more than six months after the charges come into effect. This is where Environmental Biotechnology Ltd’s trade effluent analysis usually comes to the rescue.
The Mogden formula
There are a number of interesting features in the way charges for trade effluent are calculated. The water industry generally charges for trade effluent discharged to sewer on the basis of the Mogden Formula, named after the sewage works near Heathrow Airport where it was developed in the 1930s.
The formula is based on the actual cost of treating all sewered effluents assessed on Chemical Oxygen Demand (COD) and Suspended Solids (SS). You can work out your own bill based on the latest figures using this Mogden Calculator Programme. Many Water Plc’s have argued that the Mogden Formula does not reflect the true cost of treating trade effluent since there may be many compounds in the effluent, such as heavy metals and toxic organics, which must be treated but are not currently part of the existing charging formula.
This has been under review for some time. However, in the longer term it is likely that the basis for trade effluent charging will be widened to include a number of additional potential pollutants. This is in line with the concept of the Polluter Pays principle and could be bad news for some industries such as chemical, textile and metal companies.
Some companies argue that their effluent is considerably less difficult to treat than sewage and that a lower charge should be made than the Mogden assessment. This is often the case with food processing companies. Unfortunately, this cuts little ice with the Water Plc’s since they receive trade effluent already mixed with domestic sewage. Depending on the scale of discharge and the nature of the waste, some companies treat their effluent on site using the many new technologies available which may present a realistic payback on capital invested. Environmental Biotechnology specialises in marrying problems such as these with new technical solutions and has advised the government biotechnology initiatives in this area since 1992. The current version BioWise can be seen at www.dti.gov.uk/biowise.
Investment must be based on potential savings, and the most any industry is likely to be charged is the maximum consented value for flow, COD and SS. Other restrictions may be highlighted in the consent such as ammonia or heavy metals, but these are not currently subject to a charging formula.
The lowest charge, assuming complete treatment is undertaken on site, is the reception charge (R) and volume charge (V), although this can still be quite significant. New developments, such as at North West Water and East Scotland include a charge for reserved capacity which results in a cost even if there is no discharge at all, which is based on the maximum consented value. If this trend takes hold it will make a significant difference to investment decisions in effluent treatment plant.
At each industrial site, the Mogden Formula can be used to determine the cost of discharging the same volume of effluent at different levels of treatment. Environmental Biotechnology Ltd’s Mogden Calculator makes that task easy. Coupled with quotations for treatment plant of various specifications, each site can determine if the reduction in charges achieved by different levels of treatment at different capital and operating cost, justifies investment in on-site treatment. It is important to remember that diminishing returns are likely as effluent quality improves. However good the effluent treatment, the volumetric discharge cost (R+V) remains.
New developments have been seen with IPPC which is slowly making its way through the UK industrial circuit. Some companies have been subject to mandatory COD reductions of 60 per cent or more, even when they are already well below the consent level for discharge to sewer.
This has been justified under the Environment Agency’s wider responsibility to clean up the environment. However, some water companies rely on specific industrial sources to balance other waste sources to optimise treatment. Surely, the relationship between the industry and the water company is entirely commercial and should not be subject to additional control by the Environment Agency?
One interesting feature of the Mogden approach, is the variation in the cost of discharging the same effluent in different parts of the country. The calculator shows that these can vary by as much as 300 per cent and this may be a significant factor in locating a new production facility, for example. One more recent feature is the inclusion of flow bands in some regions where larger dischargers receive a greater discount.
The charges are intended to reflect the actual costs of treating sewered effluents and are carefully regulated by OFWAT. In areas where industrial development is dense and the population high, costs for treating trade effluent are generally low (e.g. Northumbrian and Yorkshire). In the South West, where there are fewer companies over which to spread operating and investment costs, the charges are very high.
Mogden charges can also vary each year as the strength of regional sewage changes around the country. Sewage in Yorkshire, Wessex and the South West, is nearly three times the strength of sewage in Severn Trent, North West and Northumbrian. This could be due to the high level of industrial effluent or the collection systems used.
Other reasons for major increases in trade effluent charges include the increased investment in local sewage treatment works to comply with the Wastewater Treatment Directive. Each company should only receive charges for the B portion of the Mogden Formula if biological treatment is undertaken by the local sewage treatment works. If only primary treatment is undertaken then only the R, V and S charges should apply. Increasingly the latter no longer applies.
Water industry charges vary each year in line with actual costs incurred. This usually results in an increase in trade effluent charges although this charge is only one of a ‘basket’ of five charges which are ‘capped’ every five years by the K factor, approved by OFWAT. While the average of these charges can rise by no more than K plus inflation, the other four charges are domestic and, as such, are politically ‘hot potatoes’. Once again this can lead to industry deciding not to invest in on-site effluent treatment. The costs of trade effluent can not be studied too carefully.