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Interview says 'these are the Water companies estimate that climate "It requires the different Ofwat justand it becomes quite aoutcomes we want' different change will reduce water availability by discussion. parties to operate in a about 600 megalitres a day by 2040, about 10 "It parties to operper cent of total supply for some companies. different way, and we are ate in arequires the differentwe are all learndifferent way, and Perhaps that is why those water companies all learning what those ing what those different ways of working are. appear to be making a concerted effort to Before, you used to talk about specifics and tackle these threats head on. ways of working are" what your measure was. If you had impleLeinster beams: "We are pleased to see mented it, you could just tick that box. in those water resource management plans "Now they have moved it up. There was a that water companies are including climate comfort blanket before, both for the economic regulator change impacts and those are becoming integral parts of and the financial regulator. This takes it up to a whole their plans." new level. We want better water quality, we want less There is a warning, though, for energy companies. sewer flooding and we want more resilience." They are the greatest consumers of water and, according According to Leinster, parallels can be drawn between to EA calculations, abstract almost three times as much the EA's thinking and Ofwat's form of regulation. as the public water supply sector. They also use copious Leinster says promoting an 'outputs not processes' amounts of fresh water for cooling at their plants. Leinapproach is one of the EA's main priorities. "This really is ster says energy companies could find themselves in a a risk-based regulatory approach which is core to how we vicious cycle – being the cause of climate change and do a lot of our regulation, but it does require a difference being at the mercy of it. of thinking." But that's just today. The bigger challenges are Resilience may be high on Ofwat's agenda in PR14, but about preparing for an uncertain future, and abstracaffordability is higher. As the cost of living becomes a key tion reform must be top of the agenda. The government electoral battleground, it seems likely that the regulator acknowledges that current legislation, put in place to will push for cuts in bills, or at least rises below the rate limit over-abstraction, is not flexible enough to respond of inflation. You might expect Leinster to be concerned to alternating floods and droughts or increasing demand. that water companies will react to lower revenues by cutHowever, after including the long-awaited reform ting spending on sustainability initiatives, but he remains clause in the Water White Paper, the government backed sanguine. Clearly a pragmatist, Leinster knows that bills down and omitted it from the Water Bill published this will be going down, but believes water companies can summer. offset this through good management and innovation. This provoked criticism from the Efra select commitHe concedes that water companies will have to invest tee, which accused Defra of lacking the necessary sense to achieve sustainability goals, but he questions whether of urgency needed to press on with the reform. this investment has to be in "massive" infrastructure and However, Leinister does not appear too concerned capital projects. It's a view that echoes Ofwat's. about the current pace of abstraction reform. "AbstracAsked whether water companies could keep bills tion reform is planned but is going to take some time to down and use innovative approaches to maintain a good work through. I think we just have to wait to see how service, Leinster responds: "That is their challenge. that gets addressed. A number of water companies have "What is the demand side, are there catchment already planned in how to deal with unsustainable approaches that can be made, what innovation drives in abstractions and I think if we can find a way of dealing this whole area? with unsustainable abstractions through the Ofwat price "Our challenge is this: These are the things we think review process, then that gives the mechanism for how you need to do and then in the debates going forward, you actually find dealing with these unsustainable pracwe need to work out with the water companies and in tices," he says. discussion with the companies and the economic regulaDefra insists it is planning a number of measures to tors whether or not the environmental controls that we reduce unsustainable abstraction that do not require believe need to be in place can be met. legislation. One way is to make changes to abstraction "It becomes the strength of the debate about sustainlicence compensation funding losses resulting from ability – you need the economic and the business, you modifications and revocations of water company abstracneed the social and you need the environment – then we tion licences, which will now be funded through the need a grown-up debate about it. Ofwat price review. "It is a challenge we would put to the water compaLeinster seems content with this solution: "I think nies, to Ofwat and to ourselves." that is a good mechanism that will deal with a number of Leinster's main piece of advice for the new water the water companies' over-abstractions." minister Dan Rogerson would be to focus on the Water Other reforms of the water sector are already under Framework Directive because it "encompasses just about way, notably Ofwat's new approach to the price review. everything", including water quality, wildlife, and dealThe regulator has asked water companies to take greater ing with unsustainable abstraction. individual responsibility for their business plans in this "From our point of view he needs to look into the cycle, basing them on customer input and telling the Water Framework Directive and in dealing with it, think regulator the best they can do. In return, it will take a about how you take a catchment approach to it, how you lighter regulatory touch with those companies it believes can get partnerships working on it and how you get all deserve it. the different players contributing their parts." Leinster welcomes this new approach. He says water According to Leinster, utilities must continue to companies and Ofwat wasted crucial time poring over "identify how they will cope with and respond to the detailed spreadsheets under the previous regime. unexpected". In the meantime, he's impressed with the "This whole price review process for me has been industry and its regulator. For the water industry, it's a interesting because if you look at the previous price big thumbs up. review, the way it went through was line by line. Now 10 | 25th - 31st October 2013 | UTILITY WEEK