Water directive could cost UK £16 billion

At a conference on the impending European Water Framework Directive (see related story), Peter Spillett of Thames Water Utilities warned that despite significant investment in the water industry over the past decade, the industry needed to prepare for future costs of further improving the system to meet the directive’s requirements.

“We need to look forward now to AMP5 and AMP6,” he told edie, referring to industry spending plans set by regulators for the period beyond 2010. Little investment has been included in the AMP4 price review covering 2005-2010, says Dr Spillet, meaning that much of the investment is “backloaded” to 2010.

A previous study conducted by the Centre for Water Research estimated the cost of implementing the directive at up to £4 billion. But a new study commissioned by Spillett’s group suggests the cost could be four to five times higher. “We believe the costs are higher than the government is prepared to acknowledge,” he says.

Diffuse pollution from urban, road and farm run-off, intermittent sewage overflow and accidental chemical releases will place greater burdens on the water treatment industry once the directive is transposed, says Spillett. The industry – and ultimately the consumer – will bear disproportionate costs for removing nitrates, organics and pathogens from water, unless those costs are met by industrial water charges to ensure the polluter pays.

“We want transport, agriculture and the petrochemicals industry to be charged for their input into rivers,” says Spillett. “Either farmers and sewage works pay for the costs of treating the water, or they knock the pollution out at source.”

By 2004 the government will have to have established who consumes what, how much they pay, who is benefiting and who is losing out. Sophie Tremolet of ERM Development Services says that directive’s deadline for completing the economic analysis of all UK water users is tight, and will require a massive effort to collect enough information from industry and the public.

“The government needs to understand exactly how much farmers are benefiting by not paying for diffuse pollution,” she told edie. Cross-subsidies and disproportionate costs born by users will also need to be identified to establish who is eligible for derogation – allowed to work to lower limits or on longer timescales to ease the burden of heavy costs.

Other concerns raised at the conference include the lack of a legal precedent for river basins in the town planning process. According to Elizabeth Street of Street Ledgerwood Partnership, local authorities can refer both to development plans and river basin plans when granting planning permission. But the plans can overlap and may even clash on conflicting agendas. “There is nothing in the consultation papers to say which plan has precedence,” she told edie. “Ultimately, the two plans should be integrated.”