Drinking Water 2003

The price limits are set to enable water companies to deliver the services required of them over the next five year period. These include allowing for capital maintenance of assets, ensuring security of supply and compliance with the requirements for drinking water quality and environmental standards.

The Inspectorate participates fully in the review in respect of drinking water quality issues. The Inspectorate is responsible for identifying requirements for drinking water quality, agreeing priorities with Ministers, and agreeing specific drinking water quality programmes of work with individual water companies, which are then funded through the PR04 process.

The policies and priorities for drinking water quality for PR04 were set for England by the Secretary of State for Environment, Food and Rural Affairs in the documents ‘Directing the flow – Priorities for future water policy (November 2002)’; and ‘Initial Guidance from the Secretary of State to the DirectorGeneral of Water Services – 2004 periodic review of water price limits (January 2003)’.

For Welshbased water companies, policies and priorities for PR04 were published by the Welsh Assembly Government in March 2003 in ‘Initial Guidance from the Welsh Assembly Government to the Director General of Water Services on the 2004 Periodic Review of Water Price Limits (“PR04”)’.

Further guidance will be issued by the Authorities during 2004 and guidance is also expected in Autumn 2004 to inform the final determinations by the Director General.

Ofwat has also issued regular guidance to the industry on PR04 process matters.

To date, the Inspectorate has issued a number of Information Letters ^1,2,3,4,5 to companies, outlining expectations and requirements for PR04 in relation to drinking water. Meetings have been held with individual water companies throughout the process, as well as the other Regulators and interested parties. The Inspectorate has also made submissions on PR04 matters to the House of Commons Environment, Food and Rural Affairs Committee and the Environmental Audit Committee inquiries into PR04 matters.

The Inspectorate’s objectives for PRO4 are to:

• meet current and future drinking water quality standards; and
  
• facilitate the transition from large qualitydriven programmes of work (the typical postprivatisation model) to a water companydriven strategic maintenance programme to achieve agreed minimum levels of service, using mechanisms such as Distribution Operation and Maintenance Strategies (DOMS) and the Capital Maintenance Planning Common Framework methodology.

1. IL 13/02 – The 2004 Periodic Review of Prices and AMP4 – Initial Guidance
2. IL 14/02 – The 2004 Periodic Review of Prices and AMP4 – Confirmation of Initial Guidance
3. IL 15/02 – Distribution Operation & Maintenance Strategies – DWI Requirements & Expectations
4. IL 4/03 – The 2004 Periodic Review of Prices and AMP4 – Further Guidance
5. IL 5/03 – The 2004 Periodic Review of Prices and AMP4 – Appraisal Methodology for Water Company Proposals for Drinking Water Quality Improvement Schemes

The main drivers for drinking water quality are as follows:

• completion of the 20year distribution mains improvement programme. This applies mainly to five companies whose renovation programmes will run through most of the fiveyear period;
  
• improvements to water treatment facilities, where necessary, to meet current and future standards;
  
• programmes of strategic lead pipe replacement, where necessary, to meet revised lead standards; and
  
• improving the acceptability of water to consumers, by reducing consumer complaints of discoloured water, and addressing taste and odour issues.
  

To gain support from the Inspectorate, and thus inclusion in the water companies’ business plans, any scheme proposed by a water company has to demonstrate justification of need, and have a mechanism to demonstrate the benefits that accrue to consumers. The assessment process was set out in Information Letter 5/03.

The PRO4 assessment process

Water companies submitted their preliminary assessment of drinking water requirements in response to Information Letter 13/02. After an initial technical challenge by the Inspectorate, the water company costs were used to gauge the potential size of the drinking water quality programme and any areas of difficulty.

Companies then submitted detailed proposals for each individual scheme in June/July 2003 in response to Information Letter 4/03. The Inspectorate carried out a preliminary assessment of the schemes and issued Preliminary Opinion Letters (PoLs) setting out whether it was minded, or not, to provide technical support for the schemes to be included as quality programmes in water company draft business plans. These preliminary opinion letters were circulated to other stakeholders for comment. The letters were then used by the companies as the basis for making provision for drinking water quality improvement programmes in their draft business plans, which were submitted to Ofwat in August 2003.

The Inspectorate carried out a further detailed assessment and technical audit of the provisionally supported schemes, with a view to providing companies with a Letter of Support (LoS), or otherwise, for them to include the schemes in their final business plan proposals to be submitted to Ofwat in April 2004. The letters of support took account of ministerial guidance on the quality programme, and will be confirmed, or otherwise, on issue of further ministerial guidance. For nitrate schemes, which are dependent upon wider environmental considerations, such as abstraction licences, the Inspectorate has initiated dialogue with the Environment Agency, English Nature and water companies to ensure that each of the proposed solutions is the most appropriate and costeffective. A Letter of Confirmation was also issued to each water company summarising the programme content and delivery profiles.

The Inspectorate will formalise these programmes of work on issue of further ministerial guidance on PR04.

A summary of the supported programmes of work is presented in Table 1 below.

Table 1. Drinking water quality programme by water company (England and Wales) Table 2. Programme by drinking water quality driver (England and Wales)

Table 2. Programme by drinking water quality driver (England and Wales)