WET News

News+ Water UK investigation reveals 300,000 sewer blockages are occurring every year, costing the country £100M. P4 Onsite: Hydraulic modelling When Brazilian company Prolagos decided to put its water master plan into action it turned to hydraulic modelling to nd the best scenario. P10, 13 Insight: Pumps & pumping systems When overpumping was required during an upgrade of a Somerset pumping station, renting an electric- powered solids handling pump proved the solution. P18 WET NEWS WATER AND EFFLUENT TREATMENT NEWS Warning comes as Ofwat publishes challenging blueprint of its PR19 expectations. Water firms must spend more in latter stages of AMP6 JANUARY 2018 Volume 24 • Issue 1 'Future proo ng' UK water needs innovation W ater companies will need to invest more in the latter part of AMP6 if they are to avoid under-perfor- mance payments in the rst year of AMP7, Adrian Rees, regional director, water at AECOM, has warned. According to Rees, Ofwat expects companies to align their performance commitment targets with the forecasted upper quartile performance of their peers in year one of AMP7, without a transition period. Increased investment "could cause many contractors to face an unexpected squeeze on resources", Rees said. "Pressure on resources com- bined with work needing to be completed potentially faster than previously anticipated are likely to result in contractor tender prices rising in the coming years. Water companies must ensure they work closely with their alli- ancing partners and contractors to ensure they receive the best prices for any increased work in AMP6." Rees added that compa- nies should also analyse their procurement processes and look to directly procure materials and subcontractors for their Tier 1 contractors using increased econo- mies of scale and xed framework contracts to mitigate cost increases due to greater demand. H i s c o m m e n t s f o l l o w e d R achel Fletcher, who was senior partner for consum- ers and competition at Ofgem, is the new chief executive of water regulator Ofwat. She joins Ofwat on January 8. Fletcher's appointment fol- lows"the departure of Cathryn Ross, who moves to BT as director of regulatory a• airs. Having joined Ofgem in 2005 a n d du r i ng h e r t i m e t h e re , Fletcher was also Partner for Ofwat's publication of its PR19 methodology, when it signalled a record low cost of capital. The regulator has outlined an initial view of the cost of capital of 2.4% in RPI terms, which would be a r e c o r d l o w f o r a r e gu l a t e d utility. It estimates this reduced cost of capital could result in an aver- age saving per customer of £15-£25 per year from 2020 onwards. The cost of capital is the allowance Ofwat makes within its price con- trols for the costs of raising debt or equity to fund improvements. The 2.4% gure represents a mate- rial reduction of 1.3% since PR14, driven by lower expectations of the market cost of debt and equity, Ofwat said."Ofwat wants water companies to go the extra mile in terms of the services they pro- vide to their customers in the years ahead. Help for vulnerable customers will, for the rst time, be an explicit part of a price review and water companies will be required to devise and deliver plans to identify and help custom- ers in vulnerable circumstances; Ofwat will report on these plans. The regulator is also challeng- ing water companies to improve the resilience of their services. Companies need to plan long term and develop smart solutions to address the pressures of a growing population and climate change. Water companies must submit to Ofwat by September 2018, a business plan outlining in detail how they will deliver on these challenges. Michael Roberts, Water UK chief executive, said: "This is a tough challenge from Ofwat – and it'll be tougher for some compa- nies than others – but the industry has a strong track record in pro- viding customers with a world class product and service. We've cut bills, increased help for the less well-o• , and reduced leakage by a third, and we are committed to a c h i e v i ng e ve n m o re f o r I nnovative solutions will be required to future proof UK Water to meet the growing demand and resource needs of the next ten years, according to a report published by Veolia. H2027: Future-proofing UK Water sets out how the water industry could meet the chal- lenges of population growth and unpredictable rainfall, combined with the need to reduce energy usage and carbon emissions. By analysing the trends and high- lighting what new technologies could be delivered the report seeks to show how the industry could be transformed to meet future demand. The report uncovers where under-used resources such as bio-resources could be captured to potentially double renewable power generation and deliver energy self-sufficiency to the industry, as well as using bio- resources as a valuable natural resource for agriculture. It also raises leading questions over R&D, collaboration, operational e¨ ciency and asset maintenance as the industry looks to ensure it meets regulatory requirements, customer needs and value for money criteria. John Abraham, COO, UK Municipal Water and Ireland, said: "By challenging the water industry we hope to create and drive further value and oppor- tunity for the future and in turn reduce the environmental impact of distributing and recycling water." Inquiry launched into UK nitrates pollution T he House of Commons Envi- ronmental Audit Committee has launched an inquiry into nitrates pollution in the UK. The committee will consider the nature, scale and impacts of nitrate pollution on the environ- ment and human life, and review the government's approach to the regulation of the chemicals con- cerned and its approach to reduc- ing them. Nitrates are damaging to the environment as, once they are released in water, they exacerbate the growth of algae, which leads to a shortage of oxygen in the water, and ultimately to dead zones where animals cannot live. Nitrates are mainly produced for fertilisers, but also come from air pollution, sewage and mining. According to the committee, there have been growing concerns a b o u t n i t r a t e u s a g e a n d pollution. There is also a substantial amount of hidden nitrates stored in rock, which would vastly increase nitrate pollution if they are released into water. Nitrate pollution is currently regulated by the EU. Experts have said this regulation will be at risk when European laws are rolled over into domestic legislation in 2019. The Environment Agency is responsible for regulating those who put nutrient pollutants in the soil. Need to know Water companies must submit their business plans by September 2018, outlining in detail how they will deliver on Ofwat's challenges Ofwat does not expect a transition period between AMP6 and AMP7 Companies need to plan long term and develop smart solutions to address the pressures of a growing population and climate change Water companies need to start tracking their investments against performance commit- ments customers in the future." Rees said: "For many water companies, these changes will be welcomed, and they will cer- tainly help to provide a positive pro le for the sector at what is a politically delicate time. The changes are already driving step changes across the industry, put- ting water companies under pres- sure to optimise their investment decisions to improve performance for customers as the means of generating returns to their inves- tors, rather than through nancial levers such as beating the chal- lenging 2.4% cost of capital. According to Rees, the expec- tation from Ofwat that companies adopt in-period ODIs means water companies will need to be even more certain that their invest- ments are resulting in increased performance and provide the best value for money. "It will also be essential for water companies to start tracking their investments against performance commit- ments to gain a better understand- ing of whether or not they are on the way to achieving their targets. This will enable them to forecast the long-term societal bene ts of their investments in financial, manufactured, natural, social, human and intellectual capital, so they can make better-informed investment plans and decisions across their business. "Securing these agreements puts Interserve on a rmer footing. Whilst there is still much to do, Interserve has signi cant opportunities based upon a strong client base…" Debbie White, Interserve. P3 "This is a tough challenge from Ofwat – and it'll be tougher for some companies than others" Michael Roberts, Water UK. P1 some companies than Michael Roberts, Distribution, leading the Electric- ity Price Control Review and introduced the Low Carbon Net- work Fund. Before joining Ofgem, she worked as a consultant advis- ing public and private sector organisations around the world on energy strategy and policy. Fletcher said: "Ofwat has"set a high"ambition"for"what"the"sec- tor should deliver for customers, and"meeting"this challenge"is what"makes the role so exciting. With the upcoming price review, new business retail market and ongoing"requirement for the sector to secure the trust and con dence of customers - there is lots to do. I look forward to building on the work done so far and working with the Ofwat team to make a positive and lasting di• erence for customers." Ofwat chairman Jonson Cox said: "Rachel's impressive track- r e c o r d a n d e x p e r i e n c e i n regulation of network and cus- tomer focused businesses, along- side her clear leadership qualities, make her an ideal chief executive for Ofwat. Rachel will complement the team leading the upcoming price review and she will take Ofwat forward to the next phase of its evolution beyond 2020. I am really looking forward to work- ing with her as we push the water sector to deliver more of what matters for customers." Rachel Fletcher is O• at's new chief executive Jonson Cox: "...Rachel will take Ofwat forward to the next phase of its evolution beyond 2020"

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