Water companies on average save only a mug of water per customer per day through promoting water efficiency, according to new research from the Institute for Public Policy Research (IPPR) published on Monday.

IPPR says a Water Efficiency Commitment would incentivise water companies to provide more help to customers to improve the water efficiency of their homes. This could be achieved by providing grants or incentives for customers to replace their inefficient appliances and devices with:

• low or dual flush toilets;
• aerated or spray taps;
• low-flow showerheads; or
• Water butts and sophisticated rainwater harvesting systems that store and use rainwater for non-drinkable uses, such as flushing toilets.

Ian Kearns, IPPR deputy director said:   "This year's droughts and water shortages have shown that we all need to do our bit to save water. But the water companies should be doing more. A Water Efficiency Commitment that sets minimum targets, enforced by the regulator, Ofwat, would incentivise water companies to help their customers improve the water efficiency of their homes. "

IPPR also recommend that alongside a Water Efficiency Commitment there needs to be an acceleration of water metering, particularly in areas prone to droughts. IPPR says that paying for water according to how much you use provides customers with a more visible incentive to conserve water than the flat rate system. But IPPR argues that with higher rates of water metering the Government would need to provide safeguards to support low income and vulnerable households which might include:

• Expanding the Vulnerable Groups Scheme to cover a wider range of low income customers. The scheme caps bills of eligible, metered households at the average household bill for each water company area.
• A ‘water affordability' grant scheme similar to ‘Warm Front'. This would provide grants to replace water wasting products with more efficient devices like dual flush toilets.
• Water companies focusing a fixed proportion of their water efficiency schemes on low income and vulnerable households.
• Water companies focusing a fixed proportion of their water efficiency schemes on low income and vulnerable households.

IPPR's water efficiency table (above) is based on data the water companies have given to the regulator Ofwat for the years 2002-3, 2003-04 and 2004-05. Ofwat has verified thatIPPR's analysis is correct based on the data supplied by companies. All prices have been transformed to 2004-05 prices. Water efficiency activities by water companies may include promotional campaigns, research, water fittings regulations enforcement, partnership working, incentive, and retrofit schemes.

The Environment Agency suggest the average household could reduce its water use by 14 per cent (49.3 litres per day) through fitting a package of five retrofit water efficiency measures. Based on an average water and sewerage bill of £295 the pay-back period was between 22-26 months, and metered households could save an average of £34.60 to £41 a year.

In 2004-05, the average combined per capita consumption of water in England and Wales was approximately 150 litres per person per day. Denmark and Germany both report 127 litres per person per day.

The Energy Efficiency Commitment (EEC) is the principal policy mechanism driving increases in the energy efficiency of existing homes. It requires electricity and gas suppliers to achieve targets for the promotion of improvements in energy efficiency in households. All obligated energy suppliers met or went beyond their energy efficiency targets for the first phase (2002-05) and suppliers have already met 60 per cent of their targets for the second phase (2005-08). Most low income households and more than 2 out of 5 of all households have directly benefited from the first phase of the EEC (2002-05).

This year, under the EEC, British Gas announced an initiative offering 880,000 householders in sixteen local authority areas across Britain the opportunity of rebates worth up to £100 on their council tax if they install energy efficiency measures. Council tax rebates appear to be an effective means to motivate householders to install energy efficiency measures. Over a five year period households could save up to £485. If all eligible households over sixteen local authorities sign up to the programme, this could result in annual carbon saving of around 193,000 tonnes. A further forty councils are in discussion with British Gas about similar schemes.

A statutory Water Efficiency Commitment would be difficult to set up in time for the next periodic review in 2009, due to the limited information on the effectiveness of water efficiency measures. Therefore a voluntary approach should be followed initially. This should be reviewed in the run-up to the price review in 2014 with a view to introducing a statutory Water Efficiency Commitment in 2015. Penalties for failure to meet targets could be on a similar basis to that of leakage, whereby Ofwat is given the discretionary power to fine companies a proportion of turnover (up to 10 per cent).

In England and Wales, 28 per cent of domestic customers are metered.

From the available evidence based on Folkestone and Dover's application for water scarcity status in March 2006 70 per cent of customers would pay the same or less and 30 per cent would pay more under a compulsory metering scheme.

See Water UK's response to the IPPR research - Think Tank is Half Right in the Regulation and Legislation section of Water News.