Severn Trent Water has called for Ministers to set "clear priorities for future investment" in a new report which looks at how environmental legislation like the EU Water Framework Directive can be implemented in a way that delivers environmental improvements whilst keeping water bills affordable.

The water company's latest Changing Course - the Water Framework Directive report says the central challenge raised by the Directive in the UK is how to make significant environmental improvements whilst keeping customers' water bills affordable. Severn Trent Water's 2010 Changing Course report estimated that to meet the more stringent WFD standards through further improvements to sewage treatment would push up customers’ bills by 19 per cent between 2010 and 2030

Writing in the Report's Foreword, President of the Society for the Environment and campaigner Tony Juniper said:

"Considering the economic circumstances prevailing now, the extent to which water prices can be controlled while at the same time making progress in restoring the health of water bodies is a vital question. Water consumers are broadly supportive of efforts by water companies to protect and improve the environment, but will support increased water prices only up to a point."

The Report says that Ministers should set out the appropriate pace and scale for investment and that the quicker the investment, the quicker the improvements – but the greater the impact on customers’ bills in the short term. Severn Trent also wants Ministers to be explicit about how much progress they would expect to see by 2027 when the WFD is expected to have been fully implemented. 

Severn Trent Water’s strategy and regulation director, Tony Ballance, commented:

"At Severn Trent Water we are proud to provide our customers with the lowest average bills in the country, and we want to keep it that way.  We also want to make the further environmental improvements our customers say are important to them.  We believe it is possible to do both as long as the Water Framework Directive is implemented in a sustainable way. The report we are publishing today sets out our recommendations for how the Water Framework Directive should be implemented.”

The Report makes three main recommendations:

• Ministers should set clear priorities for further investment, prioritising the improvement of poorer rivers rather than trying to make already generally healthy rivers even healthier - which would make the most practical difference for the funds available.
• Ministers should ensure the affordability of further improvements by setting an appropriate pace and scale for investment.
• Water companies should develop innovative, better value solutions for making improvements to the health of our rivers, in a process supported by regulators.

Tony Ballance added:

"According to the Environment Agency, our rivers are now generally in better health than at any time since the Industrial Revolution. This is in large part due to the £1,300 a household that water companies have invested over the last 20 years in environmental improvements.  We can do more in the future, but we need to do it in a way that is affordable to all our customers."

The Report also says Ministers should emphasise that only investments that are  affordable to customers and provide long-term value for money should be implemented.They should also make it clear that the views of water customers should be the critical factor in determining what constitutes a disproportionate financial cost. 

The report is the fourth in Severn Trent Water’s Changing Course series about how to shape a better, more sustainable water industry that delivers what customers want, including excellent value for money.  

The Water Framework Directive is generally acknowledged to be one of the most significant pieces of legislation to reach the statute books - necessitating major investment by the water companies.

The Report flags up the central challenge that the water companies have to tackle on their upcoming investment plans for 2015-2020 and beyond - whilst customers support improvements to river quality, the firm's Willingness to Pay research also showed that customers are unwilling to see significant increases in their overall bills. When presented with a package of improvements, a majority of customers (60 per cent) were unwilling to pay any increase in bills.Severn Trent saidThe willingness to accept increases in bills is significantly lower than it was when customers were last surveyed in 2007, reflecting the current state of the economy. People have less money than they did seven years ago and the prospects for rising incomes are poor for the next few years.

“Water companies should lead the drive for environmental innovation”

The Report says that the task of complying with the WFD is huge and that policy makers should be encouraging innovation by giving companies space to innovate.

The Report is calling for the water companies to change their approach to risk and take a leading role in driving environmental innovation forwards, supported and incentivised by regulators. This should in turn be backed by both the environmental and economic regulatory frameworks. Severn Trent Water also want the Environment Agency and Natural Resources Wales to encourage flexible consenting regimes that allow water companies to adjust to the actual environmental conditions experienced. The Report says this would reduce their energy usage, with an associated reduction in the amount of carbon used. 

Ofwat should also incentivise companies to be less risk-averse, and to innovate and adopt new solutions that have a good prospect of success at lower cost – even if the solutions cannot guarantee success.

The Report says that a new approach is now needed and that it is clear that the current way of implementing the WFD is meeting with limited success. In Severn Trent’s view  a more cost-effective and flexible approach would make implementation of the Directive “more palatable to customers” , thereby increasing the chance of successful implemenatation. 

The report criticises the current “one out, all out method” whereby a river or water body must pass up to 61 tests to achieve good status, for measuring success as a poor way of tracking progress. Under the present system, a score of 60 out of 61 is treated no differently from a score of only 10 out of 61 – both are failures.

Severn Trent Water is proposing the introduction of a new Good Status Index to measure success In implementing the WFD. While the end goal – “good” status – would be the same and the criteria need not change, instead of countries - being assessed on whether they pass or fail the goal, they would be measured on the progress they are making towards achieving the goal. 

Click here to read the Changing Course through the sustainable implementation of the Water Framework Directive Report in full.