More to be done

Catherine Wright, AMP4 project manager at the Environment Agency, sets out the regulator's views on the current Water Pricing Round

In November 2004 Ofwat will set water prices for the period 2005 to 2010. We now know the government’s priorities for this price review with the publication of Principal Guidance to the Director General of Water Services. To a greater degree than any other utility, the water industry is an environmental business. It has a successful track record of delivering improvements, investing some £1bn each year in the environment. This investment has paid off in the benefits such as river and bathing water quality that we have enjoyed since privatisation. As the regulator, the Agency supports spending directed at maintaining current environmental standards.

Previous periodic reviews have to a large extent focused on over-arching water industry problems like providing minimum sewage treatment standards and dealing with unsatisfactory storm discharges. But there are continuing pressures on the environment, and 14 years after
privatisation it is still a big challenge.

Companies need to be able to provide enough water to customers into the future without damaging the environment, but many freshwater fens, bogs and grazing marshes are at risk of drying out from abstractions. One in 19 rivers are still of ‘poor’ or ‘bad’ quality, rising to one in eight urban rivers. There are nearly 2,000 polluting unsatisfactory storm sewage discharges. Over half of rivers have high levels of the nutrient phosphate. For the future, issues such as the demanding standards required by the Water Framework Directive, impacts of climate change, and the provision of resources for new developments like the Thames Gateway, means, we believe, continued investment.

Approved measures

There is no doubt that the programme approved by ministers will go a long way to address these issues, ensuring that the industry can meet its legal obligations and bringing major improvements for people and the environment. Ministers have approved around two thirds of the programme proposed by the Agency, English Nature and Countryside Council for Wales, which will:

  • control pollution from storm sewage overflows;
  • protect our most important wildlife sites from pollution;
  • control water leakage and manage water demand;
  • tackle the water industry’s contribution to problems caused by the nutrient phosphate; and
  • take forward pilot studies to determine how sewage treatment can be used to remove endocrine disruptors.

But there are other sectors such as farming which impact on the environment, and government initiatives to address diffuse pollution strategy will be a key part of the drive for improved environmental benefits.


However, the Agency was disappointed that the government decided not to use the opportunity to make progress on other environmental issues that we put forward, such as further protection for existing shellfisheries and meeting national river quality objectives. The costs of these additional policies are being deferred, and will be required in future to meet the challenges of the Water Framework Directive.
Water bills will have to rise to an extent to reverse the environmental damage caused by the industry. But the environment is not the only pressure on bills: rising costs of maintaining the network, improvements to drinking water and the need to maintain attractiveness to investors all pressure bills. We will not know the final outcome until the director-general published the price limits. The challenge is to ensure that improvements are as cost effective as possible.
The government’s decision is an important step forward for the water environment. But the challenges for the industry remain of meeting all the pressures and demands on their network in an environmentally sustainable way, but in making its contribution to the Water Framework Directive.

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