New ‘inset’ water company wins first major supply contract

Albion Water is celebrating the decision of Shotton Paper to defect from Dwr Cymru, in search of a better value water supply. Ofwat's director general Ian Byatt has now provided Albion, a joint venture between SW Water and Enviro-Logic, with a licence to supply Shotton from May 1st.

Shotton’s managing director Martin Gale says he is “looking for improvements in both price and quality of service within 12 months”.

The pressure is now on for Albion to deliver, following the long-awaited approval of its first large-scale contract. Shotton Paper on Deeside in Clwyd is the UK’s largest pulp and paper mill, using over 250Ml of water every year.

For the time being, Albion Water will buy water in bulk from Dwr Cymru and sell it to Shotton at the same price. However, Dr Jeremy Bryan, managing director of Enviro-Logic, is confident that improvements will soon be made: “Although Shotton is already an extremely efficient water user, our challenge is now to find ways of taking this efficiency further. Possibilities include treating and reusing the mill’s effluent, or developing new resources.”

He did not elaborate further, but pointed out that “you certainly don’t need drinking water to make newsprint”, and as Mr Gale said that “water specifications were under examination,” there may be potential to save money by reducing the degree of water treatment if a local source can be tapped.

Earlier in the year, Albion had been tipped to win contracts to provide sewerage services for a number of food and drinks manufacturers in the Midlands, currently served by Severn Trent Water, including Bass Burton Brewers, Walkers Snack Foods in Leicester and Britvic Soft Drinks in Rugby. However, Albion Water is still working to persuade these companies to give the final go-ahead, despite the approval in principle of a licence by Ofwat.

Dr Bryan said: “We have been talking to the water-intensive industries for 4-5 years now, but Shotton is significant as it is the first case where a new water company has effectively been created.”

There is some dispute as to whether such “inset” appointments really represent true competition, especially if the inset appointee remains dependent upon the infrastructure of the previous operator, or regulated as part of an existing water service company by Ofwat.

Private suppliers could pose a more independent threat to the public water utilities – for instance, it is possible to avoid regulation by Ofwat if not linked to an existing plc, simply by applying for a local abstraction licence. So, the question remains; will the established utilities stand by and watch, while entrepreneurs poach significant commercial opportunities?

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