Water UK ,the industry association that represents UK statutory water supply and wastewater companies at national and European level, has published its responses to two separate consultations by Defra and the Treasury, and by the regulator Ofwat, on extending competition in the water industry.

The first response is to  the Cave Review for Defra and Treasury consultations on competition and innovation in the water industry. The response focuses on competition and will be followed by another on innovation in September.Water UK states that its core objective is sustainable water policy – actions and solutions that create lasting benefit by integrating economic, environmental and social objectives. In the light of this key aim the Association believes that more work needs to be done to clarify the benefits and risks of competition for the industry so that a suitable framework for competition can be developed that produces these benefits, removes unacceptable risks and mitigates others.

Water UK also raises the question of how water and sewerage networks are developed - which is not the subject of a specific question in the Cave Review. The Association says that this is a very important issue which is relevant for a number of competition models, including inset appointments and upstream competition. According to Water UK, water companies strive to plan the development of their networks with a long-term and strategic perspective, anticipating housing developments, local authority plans, etc.

Water UK says “Infrastructure charges are designed to help water companies fund this kind of long term investment in their networks even if many believe they are inadequate, both in the rationale underpinning them and in their monetary value.”

Water UK  believes there needs to be more integrated thinking on the development of new infrastructure – otherwise there is a real risk that the expansion of insets, and common carriage and upstream competition, will lead to a very piece-meal extension of both water and sewage networks . The response states that almost by definition, the infrastructure which new entrants or developers build within an inset or in order to compete upstream will be self-contained and insular investments, appended to a network but not integrated with it.

Water UK is highlighting the risk that particularly with insets, but also with capital investment in water and waste water treatment plants and related pipe infrastructure,

“the infrastructure put in place by competitors may not have the same degree of resilience and the same quality in installation and maintenance ….Unless steps are taken to control the situation, water customers may find themselves in a few years in the same situation as the owners of private sewers find themselves now. They are supplied with sewerage services in an unsatisfactory and below-standard fashion and require heavy-handed Government intervention to make water companies adopt private sewers which should never have been laid in the way they have been. It would be unsustainable if Government were to repeat this mistake..”

Water UK concludes that regulation of competition is likely to be most effective if there is clarity about Government objectives and the role of the regulator in implementing them and that regulation will only have the tools to support a sustainable industry when Parliament determines a clear set of objectives for the water industry and for water competition, and sets the framework within which regulators operate.

On the question as to whether the development of competition to date supported the efficient and sustainable use of water, Water UK says that none of the forms of competition which have been proposed so far are likely to have a significant impact on how sustainably water is used by end customers.

Both consultation responses are available to download from the Water UK website.