The Consumer Council for Water (CCWater), the body that represents water and sewerage consumers in England and Wales, has raised major concerns about the proposed Thames Tunnel in its consultation response.

While CCW accepts that the London drainage system needs to be improved, it says that work already underway by TMS will address many of the current problems associated with storm overflows.

CCW said that the projected £60-65 cost of the Thames Tunnel project is in addition to several other future pressures on customers’ bills, including:

•  transfer of private sewers and laterals to company ownership;
• extension to the company’s metering programme;
•  implementation of Water Framework Directive measures; and
• possible development of the Upper Thames Reservoir.

 The watchdog said that the cost burden was likely to have significant affordability impacts for some Thames Water customers which must be considered as part of the cost benefit assessment.

According to CCW, the history of the scheme suggests that costs have consistently been underestimated and some benefits overstated. The costs of the scheme have escalated - despite the adoption of a shorter route for the tunnel (originally proposed by CCWater) and the reduction in the number of access points and shafts required.

Customers also needed to know that the cost benefit analysis in support of a tunnel is robust and can be trusted. Early scrutiny by CCWater found that elements of the case made could not be justified and had little credibility.

The Council said that the potential for further cost escalation, and bill increases in excess of those already given, was a major concern. In addition, uncertainties over the options for the financial treatment of the project and the new planning approval processes and timescales added to the risks.

The watchdog said it had “extensive evidence available” in support of the points it was raising in its response which it would be pleased to discuss further with Thames.

CCW said there may be scope for further reductions in cost while remaining fully compliant with the Urban Waste Water Treatment Directive (UWWTD) requirements.

The Council is also seeking “clarity” over whether and/or how the test for “excessive” costs under the terms of the UWWTD has been applied to the latest proposal. The test provides for the cost of a solution to be compared to the potential damage arising and allows Member States some discretion over the degree to which best available technical/engineering solutions are used to mitigate that damage.

CCW also want to know how UK interests (protection against risk of infraction proceedings against the Government under the UWWTD) have been balanced against the interests of existing and future TMS customers (who will pay for it).

“Costs have escalated”

CCW has drawn particular attention to escalation in the estimated cost of the project - from £1.7bn in 2004 (including Lee Tunnel and sewage treatment works costs) to £2.2bn in 2007 (also including Lee Tunnel and STW costs) to £3.6bn now for the shorter Thames Tunnel as far as Abbey Mills, plus some £1bn for the Lee Tunnel and upgrade of works at Beckton.

The Council point out that the total costs of all the Tideway schemes have therefore increased from £1.7bn six years ago to £4.6bn today (all costs at relevant year prices) – and says there is no guarantee that the current estimate will not be subject to further escalation.

The Council also refer to “confusing inconsistencies” in varying estimates of how the projected £3.6bn spend will increase customer bills: around £60-£65 per year, according to the Secretary of State’s statement on 7 September 2010; £52-£55 on the average bill by 2018, according to TMS’ public consultation; and £40 per year, according to a recent Parliamentary Question.

The Council said:

“In our view, the very real risk of further cost overruns of the tunnel, combined with these other cost pressures, mean that customers are facing bill impacts that are likely to be far higher than those estimates given so far.

It is imperative that customers are provided with an accurate picture of bill increases derived from the costs of this project, and other likely pressures on bills, how such bill increases will accumulate over time, and how long they will last.”

The Council is also calling for “the substantial carbon costs associated with a project of this nature” to be quantified and properly addressed. These include carbon costs associated with excavation and removal of hundreds of thousands of tonnes of spoil, and the manufacture of concrete and other materials for the tunnel.

CCWater said that that the Thames Tideway Strategy Study Group should be reformed and reinvigorated so that key stakeholders could continue the previously close dialogue on the issues.

Download CCW’s full response here.