The recommendation forms part of a new discussion paper published by Ofwat exploring the costs and benefits of faster, more systematic water metering, compared with existing approaches.
The aim of the paper is to help stakeholders and other interested parties understand the regulator’s current thinking on the issue.
The paper compares five scenarios for the future level of water metering in England and Wales:
- keeping the level of metering at current levels (38%);
- continuing with the existing approach to metering of request-based installation – Ofwat estimates that 90% of households will have a meter in 40 years’ time on this basis
- accelerating the level of metering so that 90% of households will have a water meter in 10, 15 or 20 years.
Overall the results support the conclusion of the independent Walker review of charging for household water and sewerage services. Ofwat found that faster rates of metering in England and Wales could be “significantly beneficial for customers and the environment” under certain conditions.
The paper says that the costs of continuing with the present system(‘business as usual’) outweigh the benefits, compared with holding the level of metering at 38%. However, the additional benefits of metering at a faster pace (90% levels achieved in 10, 15 or 20 years) outweighed the additional costs, compared with the ‘business as usual’ scenario.
Ofwat concludes that based on its assumptions and the options considered, achieving 90% household meter penetration within 20 years (2029-30) would deliver the greatest net benefits. The largest benefit of metering in Ofwat's central case is the carbon reduction caused by consumers using less hot water.
Metering will be one of the areas addressed in the forthcoming Water White Paper. In Wales, the Welsh Government has also recently consulted on the Walker Review of charging for household water and sewerage services, with a view to informing future Welsh Government policies.
Currently, 62% of households in England and Wales are unmetered and pay a fixed annual fee for their water, in most cases based on the rateable value of their property. While some water companies are installing meters for network management and leakage purposes, they cannot introduce metered charges unless requested by the customer.
Only water companies in areas designated as ‘seriously water stressed’ are allowed to meter their customers compulsorily as part of a plan to maintain secure water supplies. Currently, only two companies have approval to carry out large-scale, compulsory metering of their areas.
In 2009, the Walker review concluded that charging according to the rateable value of a property is becoming increasingly untenable, and that volumetric charging was the fairest means of charging households for water.
The paper suggests that the water industry may need to do further research on the issue. Ofwat is seeking feedback on the paper by 30 November 2011.
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