90. Water Privatisation: Past reasons, present problems & future prospects, 6 December 2023

Court Assistant Dr David Lloyd Owen, Managing Director of Envisager, presented this fascinating webinar to a large online audience of about 75 from the Company and many outside the Company. David explained the background to and build up to privatisation: the Water Act, 1973 had merged 157 water and 1,398 sewerage entities merged into 10 Water Authorities (29 independent SWCs ~ 25% of E&W water). 80% of sewage was treated in 1990, 75% of treatment plants failed to meet their discharge consents. River water quality fell by 5% between 1985 and 1990. The EU was the driver for better water treatment and quality.

The public share offer was 5.7 times over-subscribed.  A £1.52 bn “green dowry” was used to ease the cost of EU compliance. Net of the “green dowry”, the share issue raised £3.59 bn.

After the 1985 drought Water plcs were put under pressure to increase their dividends and they diversified to increase non-regulated profits. The Golden Share was handed back in 1995 and take-overs started in 1996 (Southern Water by Scottish Power). From 2000-2012 assets were stripped out and gearing increased.

In 2022 16% of England’s inland waters were of ‘good ecological quality’, agricultural runoffs (slurry, fertilisers and pesticides) accounted for 40% of failures, sewage treatment plant discharges 29%, combined sewer overflows 7% and urban sources (road run-off, etc) 18%.

Environment Agency monitoring funding dropped from £120 million in 2010 to £43 million by 2021. 305 farms were visited in 2019, 4,137 in 2022-23 but 7,300 farm were visited annually by the NRA in 1993-95 (7% of farms). 44 bathing waters were tested under the Water Framework Directive in 2022; 0% excellent, 39% good.

Future Water 2023 report card

Theme                                    Score          Observations

Mains leakage                        C                 We know what we need to do

Customer-side leakage           D                 We do not yet know what to do

Asset health                           D                 “Managed decline part 1”

Sewers maintenance              D                 “Managed decline part 2”

Sewers                                    E                 Is ignorance bliss?

People                                    C / D           Five year hire-fire cycles hurt

Innovation                              C / D           Rising from an unquiet sleep?

Research                                 D / E           UKWIR is underfunded

David endeavoured to look forward with a positive perspective. The National Infrastructure Commission 2023 report recommended universal smart metering and broad adoption of nature-based solutions and sustainable urban drainage. Event duration and volume monitoring of discharges is required. Smart metering is essential for managing the system. The E&W goal of 50% coverage by 2040 is an opportunity missed. Metering is required to identify internal leaks and leaky loos in a timely manner and raise the accuracy and efficacy of network leakage monitoring. And we need adequately resourced regulators!

He then asked some fundamental questions. How will we procure the investment in debt (and some equity) needed to 2050? Do we have the staffing and industrial capacity required to deliver the necessary changes? How do we make the sector attractive to invest in? Do we need new financial vehicles that can lock into the increase of a utility’s Regulatory Capital Value? How do we get everyone to value water, and the treatment of waste water, and recognise that we are all going to have to pay for it - both in terms of water charges but also in paying for the food and other products that are so dependent on water?

It was a great presentation and I recommend watching it again.