Leakage, a capital offense

There are concerns leakage has fallen off the regulatory and political agenda since 1995 when drought last brought the problem into the spotlight. Leakage levels in 2001-2 saw their first rise, of 5%, since before the 1995 drought. That 19 of the 22 water companies met their leakage targets merely served to emphasise the problems facing the other three.

Leakage at Anglian, Three Valleys and Thames increased by 30Ml/d, 17Ml/d and 177Ml/d respectively. Ofwat director general, Philip Fletcher, cited Thames’ figures as the cause of “most concern”.

The statistics led Ofwat to issue a warning to the failing companies. While Anglian and Three Valleys “will recover and meet the target for 2002-3”, the regulator reimposed mandatory targets as a further spur. Thames missed its 2001-2 leakage target by 106Ml/d, leading Fletcher to comment: “I am very concerned that [Thames’] leakage has worsened significantly. I would be prepared to take enforcement action if the company showed any lack of commitment to

the effective management of

its infrastructure.”

Legitimate targets

Since 2000 Ofwat has allowed companies with robust levels of economic leakage – the point at which it would cost more to make further reductions than to produce the water from another source – to set their own targets. New targets for 2003-4 were published in the October 2002 report, all but Thames and Dee Valley Water set their own leakage targets. Overall, if companies (excluding Thames Water) achieve their targets for this period they will have reduced leakage from 4,034 Ml/d to 2,472Ml/d, some 39% since its peak in 1994-5. But observers fear the targets are unreachable, considering that across the country leakage rose from 3,243Ml/d in 2000-1 to 3,414Ml/d in 2001-2.

In December 2002, Ofwat set mandatory leakage targets for Thames’ operations outside London, leakage must fall from the 192 1/d per property level of 2001-2 to a target of 140 1/d per property in 2005-6. The regulator intends to set mandatory leakage targets for north and south London in the spring of this year, taking account of work scheduled to be completed by the company in the early months of 2003.

Ofwat says it has chosen a “pragmatic approach” and decided against “formal action” at this stage as it considers this would be time consuming and that Thames’ current plans, including appointing a director to specifically manage the issue, will work.

The targets are part of an action plan agreed with the water company to address

levels of leakage and their possible impact on customers’ security of supply. All the steps so far required have been delivered, Ofwat says, and the regulator maintains they will help bring Thames’ performance into line with the rest of the industry by 2005-6.

Ofwat’s action follows a tripartite study commissioned by the regulator, the Department for the Environment, Food and Rural Affairs (DEFRA) and the Environment Agency (EA) which recommended Ofwat assess leakage performance over a period of more than one year. The study suggested the use of a number of leakage performance indicators will enable a better understanding of variations between companies’ performance. Determining these indicators and

comparing them to those from better performing companies would help regulators,

and possibly Thames, identifying key issues.

The study was carried out to determine how the influence of external conditions, such as extreme weather, on a company’s ability to meet a single-year target could be taken into account. As a result, from this year, Ofwat will assess targets on a 36-month rolling average. This means any regulatory action will be taken after three years, not a single year’s failure to hit target. Bill Emery, Ofwat’s director of costs and performance, said: “We view leakage as part of the wider business of ensuring there is a proper balance between the supply and demand for water. For most companies progress against leakage targets has been in line with expectations. Leakage should be reduced when it is economic to do so, and when required to improve security of water supplies.”

Among the requirements of the action plan set-up at Thames are the need for the company to:

• submit a report on evidence of asset-related problems in

  London,

• set down a strategy to achieve the economic level of leakage,

• provide indicative area leakage targets for south London until 2005-6,

• produce and implement a long-term water resource plan.

Thames has already been asked to report quarterly on its progress towards understanding its water balance, reducing leakage to economic levels and improving security of supply. Full auditing revealed Thames ‘lost’ 865Ml/d in 2001-2, compared with 688Ml/d in 2000-1. Underlying leakage was identified as the cause for most concern and the company admitted its resource development programme is unlikely to deliver the required security of supply by March 2004.

The scale of Thames Water’s leakage has led to a series of alarming statistics, the company’s losses represent:

• a quarter of all leakage in England and Wales,

• enough water to supply Greater Manchester,

• the prime reason for the first rise in overall leakage in six years.

Leakage is also high on the customer side with unmeasured household supply pipe leakage at 75.2 l/d per property. Three Valleys Water, at 52.2 l/d per property, is the next highest value.

Ofwat says some of Thames’ figures are due to more accurate estimation of the components of the water balance, but there is no escaping that it is also due to increasing leakage.

In the Thames region the EA’s national water resources strategy identified a future demand scenario of rising leakage with a consequent adverse environmental impact. In other words, if leakage is not brought under control, resource developments will be needed. In an area that is already water scarce, environmental and social impacts could be significant.

The EA has added its voice to the chorus of concern highlighting the continuing difficulty of tackling leakage in London. It raises, the EA says, the need for companies to be allowed to invest more heavily in the maintenance of underground assets.

Previously Thames’ approach to leakage worked well, according to company spokesman Andrew Boyd, helping the utility to make “major reductions” – down 38% in the three years to 1999/2000. However, Boyd continued, “following the record rainfall of the autumn/winter of 2000/2001, this has now been shown not to be sufficient. Evidence points to the rainfall having damaged our pipes, particularly in parts of London, where we already face challenges posed by local ground conditions. Despite increased investment since then in

leakage work, levels have failed to respond in the way they previously did.”

The company is now taking a new approach in the form of a major pipe replacement project. This began in Bethnal Green earlier this year, and is about to get under way in part of Bloomsbury. The mains replacement work this year is expected to cost more than £5M. Boyd says the company is still channelling “record levels” of resources into “find-and-fix” activities, and it expects to spend more than £80M this year on a more traditional approach.

The picture is better elsewhere. Severn Trent, for example, says it already meets levels for leakage that are no longer Ofwat-set mandatory targets. The company says it is close to its agreed level of economic leakage, a level of performance it will continue to maintain. United Utilities aimed to reduce levels to 455Ml/d, but achieved a lower figure of 452Ml/d this year. Since 1997/1998 the company says it has cut leakage by 127Ml/d.

Southern Water claims to have the lowest leakage rate in its water supplies to properties than any other water and wastewater company. The company has more than halved the amount of water lost through leaking pipes in the last ten years and has consistently met its target of 92Ml/d. The result, Southern says, is thanks to its annual £20M ‘leak-busting’ campaign.

South West Water claims to be recognised as one of the water industry leaders in leakage reduction work with one of the best leakage monitoring systems in the UK. The company began a programme to repair leaking pipes about ten years ago. South West says it is currently saving 45.41M/d of water a day which would previously have been lost in the ground. And that, the company says, is enough to supply the domestic needs of Cornwall. South West is currently spending £6M a year to control and maintain leakage target levels in the region.

In truth, most companies have now reached their accepted economic level of leakage following sustained work and significant investment in recent years. Setting a clear precedence, the October Ofwat report calls on the government to address the issue of replacing supply pipes. This is because it is the responsibility of businesses and households to replace the pipes connecting them to the water main if they leak, but very many are unaware that the onus is on them. Time, perhaps, to see if water leakage really is off the political agenda?