Kelda proposals could harm the environment

Plans of the water company, Kelda Group, to transfer its assets to a new mutual company offer nothing to the environment, and could actually increase environmental risk, says the Environment Agency (EA), in response to the Director General of the Water Services’ consultation paper on the proposal.

Kelda’s primary concern is with creating shareholder value, with less interest in customers, and there is nothing in the proposals on environmental issues, says the EA. The Agency is seeking reassurance in a number of key areas to ensure that, in the event of the restructuring taking place, there would be no detrimental effects on the environment or our ability to regulate it.

“Kelda’s proposal offers nothing for the environment, “ said Sir John Harman, the Environment Agency’s Chairman. “Indeed, it could actually increase environmental risk. It is vital for us to seek clarification and reassurance in a number of areas. The public needs to be confident that if Kelda – and potentially other water companies – go down the mutualisation route, that this will not lead to any deterioration in environmental standards. We look forward to receiving answers to all the questions we have raised in the near future.”

Previously known as Yorkshire Water, the Kelda Group announced its plans to transfer its assets to a Registered Community Asset Mutual (RCAM) in June of this year (see related story), effectively creating two companies, where the remaining UK water services operations of Yorkshire Water would be transferred to Kelda. It is intended that this mutual company should be owned by the customers of Yorkshire Water Services, and charged with acting in the best interests of the whole community.

Specifically, the EA is concerned that:

  • there should be a clear allocation of responsibilities between the mutual and the operating company for environmental damage, without which the resulting confusion would geatly hinder the mounting of prosecutions for causing, or failing to prevent, environmental harm;
  • there should be sufficient technical competence within the company or companies with which the EA has to deal, as considerable inefficiencies could develop;
  • there should be sufficient operating capital for the mutual to carry out its obligations, and no reduction in its expenditure on the environment;
  • the mutual company is structurally stable, as consequences of the company winding up are unknown;
  • the manner in which services are contracted out must ensure continuity, with no fluctuation in standards, which would otherwise lead to an increased environmental risk.

The EA does not accept that mutual status means that the company is not purely commercial, and is calling for the proposed RCAM to have board members with environmental interests and an executive director with explicit environmental responsibilities.

Michael Rouse, Chief Drinking Water Inspector has also recently raised concerns over the proposal, which, he says, would remove the operating company’s direct responsibility for drinking water quality.

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