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DWI Information Letter 14/2002

16 October 2002

To : Board Level and Day to Day Contacts in Water Service Companies and Water Companies in England and Wales

Dear Sir/Madam

The 2004 Periodic Review Of Prices And AMP4 – Confirmation of Initial Guidance

    Purpose

  1. The purpose of this Information Letter is to provide water companies and other stakeholders with initial guidance on the 2004 Periodic Review of Prices (PR04) and Asset Management Period 4 (AMP4) for those matters concerning the Drinking Water Inspectorate (DWI) and drinking water quality. The Letter takes account of feedback from water companies and other stakeholders on Information Letter 13/2002, and covers drivers relevant to drinking water quality, scenarios, timetable, and communication matters relating to the PR04 process. It also confirms arrangements for preliminary submissions from water companies against the drivers to enable a preliminary assessment of drinking water quality requirements for PR04 to be made by DWI to help inform stakeholders and future Ministerial guidance.

    2. Summary of actions arising in this Letter

  2. Key actions are summarised as follows:

    • Water companies to make preliminary submissions by 25 October 2002 for DWI’s preliminary assessment of requirements;
    • DWI to arrange meetings with water companies, as necessary, during October-December 2002;
    • DWI to provide input to Ministers on PR04 issues by 11 November 2002; and
    • DWI to issue another Information Letter providing further guidance on PR04 issues, following receipt of Ministerial guidance – anticipated by 30 January 2003.

    3. Update to Information Letter 13/2002

  3. This Information Letter is an update to Information Letter 13/2002, which sought the views of water companies and other stakeholders on the initial guidance for PR04 that DWI was minded to provide. It supersedes those parts of Information Letter 13/2002, which are addressed herein. Thank you to all who responded to the consultation.

  4. In preparing this Information Letter, we have sought to retain as much as possible the format of Information Letter 13/2002 for ease of reference and consistency. The main revisions are contained in paragraphs 2,13,14,15,16,18,19,38,39 and 40 of this Letter.

    5. Background

  5. Periodic Review 1999 (PR99) made arrangements to meet drinking water quality requirements for the period from 1 April 2000 to 31 March 2005 (the AMP3 period). It included the majority of work needed to meet the requirements of the 1998 EU ‘Drinking Water Directive’ (98/83/EC) (the Directive), anticipating the requirements of new and revised Regulations to implement the Directive. It also included any outstanding work to meet the requirements of the Water Supply (Water Quality) Regulations 1989 (the 1989 Regulations).

  6. The Directive has been implemented by the Water Supply (Water Quality) Regulations 2000 (the 2000 Regulations) for water companies whose area of supply is wholly or mainly in England, and the Water Supply (Water Quality) Regulations 2001 (the 2001 Regulations) for water companies whose area of supply is wholly or mainly in Wales. These Regulations contain all the standards of the Directive and most of the standards of the 1989 Regulations that were not required by the Directive (mainly for aesthetic parameters and microbiological parameters at treatment works (including Cryptosporidium) and service reservoirs). Nearly all of the standards in the 2000 and 2001 Regulations come into force on 25 December 2003, including the interim standard for lead of 25 µ/l. The final standard for lead of 10 µ/l comes into force on 25 December 2013. The standards in the 1989 Regulations remain in force until 25 December 2003.

  7. PR99 made provision for programmes of work at treatment works (all will be completed within the AMP3 period) to meet the following requirements:

    • the tighter arsenic standard of 10 µ/l;
    • the new bromate standard of 10 µ/l;
    • the tighter trihalomethanes standard of 100 µ/l as a maximum;
    • the tighter standard of 10 µ/l for the sum of the detected concentrations of trichloroethene and tetrachloroethene;
    • predicted failures of the current nitrate standard of 50 µ/l and the new standard (formula) for the combined concentrations of nitrate and nitrite that effectively tightens the nitrate standard slightly;
    • the current standards for iron and manganese (also retained in the 2000 and 2001 Regulations) that were covered by relaxations under the 1989 Regulations (relaxations are not permitted by the 2000 and 2001 Regulations); and
    • the current treatment standard of an average of less than one oocyst per 10 litres and the continuous monitoring provisions for Cryptosporidium (both also retained in the 2000 and 2001 Regulations).

  8. PR99 also made provision for programmes of work to continue the renovation of distribution systems, and for some water companies Undertakings were made for the work to extend beyond the AMP3 period, to meet the following:

    • the current standards for iron of 200 µ/l, aluminium of 200 µ/l, manganese of 50 µ/l and turbidity of 4 NTU (all also retained in the 2000 and 2001 Regulations); and
    • the tighter standard for benzo 3,4 pyrene of 0.01 µ/l as a maximum.

  9. PR99 also made a financial provision for the work needed to meet the interim standard for lead of 25 µ/l and to make a start to meet the final standard for lead of 10 µ/l (primarily for treatment to reduce plumbosolvency, but also for some replacement of water companies’ lead communication pipes). At the time of PR99, DWI was not in a position to determine the criteria that would trigger the requirement to treat water to reduce plumbosolvency, or the criteria that would trigger strategic lead pipe replacement if treatment did not achieve 25 µ/l and 10µ/l. Consequently, water companies were unable to determine the amount of treatment or lead pipe replacement required. The financial provision was made using provisional criteria that were different to those eventually determined. Water companies’ treatment programmes for lead have now been approved under regulation 41 of the 2000 and 2001 Regulations. Approval under regulation 41 has also been given to a few strategic lead pipe replacement schemes to meet 25 µ/l and 10µ/l, and further schemes are under consideration. If the agreed programmes of work required during the AMP3 period are different from the financial provision made in PR99, then financial reconciliation will be made at the next price setting. This will take account of the operating costs of delivering a programme of works for treatment measures.

  10. DWI is currently preparing for PR04, covering the period from 1 April 2005 to 31 March 2010 (AMP4). This will include advice to Ministers on the requirements for drinking water quality, advice to stakeholders on the development of scenarios for costing purposes and provision of detailed guidance to water companies on specific issues to be allowed for in their Business Plans for AMP4.

  11. DWI met with water companies on 20 August 2002 to discuss many of the issues in this Letter. It was agreed to proceed with a preliminary submission and assessment of requirements this autumn.

    12. Requirements of the 2000 and 2001 Regulations for which provision should be made in PR04

  12. Water companies are required to make provision for the following drivers for drinking water quality in PR04 Business Plans, if justification for programmes of work is supported by DWI:

    1. Programmes of work to renovate the distribution system (in some water companies the work will not be completed in AMP3 and in a few companies post-renovation assessment may not be completed until the early part of AMP5) to meet the following:

      • the standards for iron of 200 µ/l, aluminium of 200 µ/l, manganese of 50 µ/l and turbidity of 4 NTU; and
      • the standard for benzo 3,4 pyrene of 0.01 µ/l as a maximum.
       

    2. Programmes of work at treatment works to meet the following:

      • predicted non-trivial failures to meet the nitrate standard of 50 µ/l or the combined nitrate and nitrite standard (formula) during AMP4 or in the early part of AMP5;
      • any non-trivial failures to meet other new or revised [or unchanged] standards in the 2000 and 2001 Regulations that become known between now and the final submissions of programmes to DWI by water companies for draft Business Plans (provisionally May 2003) under PR04 and the work which cannot be completed within AMP3; and
      • any non-trivial failures to meet the standards in the 2000 and 2001 Regulations arising from deteriorating raw water quality.
       

    3. Programmes of strategic replacement of water companies’ lead pipes in water supply zones in which treatment is not able to meet the final lead standard of 10 µ/l (it is assumed that all treatment required will be installed and optimised in AMP3). For some, and possibly many, water companies, these programmes will continue beyond AMP4.

    4. Programmes of work to maintain the acceptability of drinking water quality to consumers.

  13. For the purposes of preparing the preliminary submission and draft Business Plans for the PR04 process only, proposed programmes of work should be based on current water supply zone delineations, i.e. no allowance should be made for the introduction of re-delineated water supply zones on 1 January 2004. Further information on the possible impact of re-delineation should be available in time for it to be taken account of in final Business Plans. DWI will issue further advice to water companies on this matter.

  14. For clarification, paragraphs 12(a) to 12(d) above include proposals to meet and maintain compliance with cryptosporidium and turbidity standards at water treatment works, and pH in distribution; and to investigate and resolve causes of consumer complaints of unsatisfactory water quality. Amplification of some issues for the submissions for the turbidity standard and consumer complaints is provided below.

    15. Turbidity standard at water treatment works

  15. The 2000 and 2001 Regulations set a non-mandatory indicator parameter value for turbidity of 1NTU in the water leaving treatment works. Whenever there is an exceedence of this value, the Regulations require the water company to investigate the cause of the exceedence and report the results to DWI who will consider whether the extent and duration of the exceedence of the indicator parameter value poses a risk to human health. If it does DWI will require the water company by notice issued under the Regulations to take appropriate remedial action. Whether an exceedence poses a risk to public health will depend on the nature of the turbidity, the duration and extent of the exceedence, the significance of turbidity as a measure of treatment effectiveness and the significance of the turbidity as a measure of other substances that could be present. DWI will judge each of these situations on their circumstances as and when they arise. Many situations will not pose a risk to human health.

  16. Where a treatment works is regularly putting into supply water with a turbidity in excess of 1 NTU, particulate matter is entering the distribution system that could give rise subsequently to problems with discoloured water irrespective of whether the turbidity poses a risk to human health. Water companies with such works should consider including them in their submissions for PR04 with appropriate details and justification and the action and timetable for any improvements to treatment.

    17. Acceptability of drinking water quality to consumers

  17. Despite the near completion of extensive improvements at water treatment works and, for many water companies, substantial completion of renovation of distribution systems, water companies, WaterVoice and DWI still receive many complaints about the aesthetic quality of water supplies. These problems may not be addressed by the main quality improvement programmes because of their nature, distribution or frequency, and we are not satisfied that sufficient progress has been made to deal with them by other means. Many water companies continue to adopt a reactive approach towards complaints, and their causes. The operation and maintenance strategies currently in development will require water companies to adopt a more proactive, and long-term strategic, approach to managing water supply systems with a view to reducing substantially the number of consumer complaints.

  18. For this driver, water companies are required, as part of the PR04 process, to submit proposals seeking DWI support to deal directly with these water quality problems. The proposals should:

    • analyse and assess consumer complaints, particularly in respect of the appearance, taste and odour of water, to determine whether there is a pattern that points to the need for action at a particular treatment works or a particular part of the distribution system;
    • set targets for a rapid reduction in the number of consumer complaints;
    • specify and justify the investigation, action and timetable necessary to achieve the required reduction in consumer complaints, and to achieve and maintain compliance with water quality standards.

  19. To gain DWI support, proposals will need to be justified by evidence of contraventions of water quality standards or consumer dissatisfaction, and provide measurable outputs to demonstrate improvements. Whilst the measurable outputs should focus primarily on numbers of consumer complaints and compliance with water quality standards, it may be necessary to establish additional secondary measures for delivery purposes, e.g. absolute values of, and variability in, residual chlorine concentrations for taste and odour.

    20. Potential future drinking water quality requirements and whether provision should be made in PR04

  20. DWI has considered information from a number of sources to assess the potential for other future drinking water requirements, and whether they should be included in the PR04 process.

  21. Article 11 of the Directive requires the European Commission to review the standards in the light of scientific and technical progress every five years and, where necessary, to make proposals for amendments. The Commission has indicated that the first review will take place by 25 December 2003, but it has not yet initiated the review. This timetable would require any new or revised standards arising from a review to be transposed into Regulations within two years (by 25 December 2005), and to be met within five years (by 25 December 2008). Consequently, it is possible that programmes of work arising from this process would fall within the AMP4 period. However, it is not possible at this stage to anticipate potential requirements for the PR04 process.

  22. The World Health Organisation (WHO) is currently preparing an update to its 1993 Guidelines on Drinking Water Quality. WHO Guidelines are normally considered by the European Commission when drafting proposals for standards. However, we consider it unlikely that the European Commission will be able to consider revised WHO Guidelines in its first review of the Directive, if current timetables for both projects are adhered to.

  23. An incident or emergency in the UK (or elsewhere if relevant to the UK) could lead to the development by the Department for Environment, Food & Rural Affairs (DEFRA), the National Assembly for Wales (NAW), and DWI of a national standard. Similarly, other drinking water standard setters around the world could also influence DEFRA/NAW/DWI directly to consider a national standard if this was warranted by health or consumer acceptability considerations. DWI will continue to be vigilant in these matters, and will act if necessary, as was the case with the introduction of Cryptosporidium Regulations in England and Wales. However, such events are not predictable, and therefore they should not form part of the considerations for PR04.

  24. The Expert Group on Cryptosporidium in Water Supplies was reactivated recently to review the latest developments. It is considered unlikely that the Group will recommend further regulatory controls on Cryptosporidium. However, should anything arise as a result of the experience of the recent Glasgow ‘incident’, water companies will be advised immediately.

  25. In summary, in view of the timing and considerable uncertainties about these potential new requirements, including the first review of the Directive, DWI considers that no allowance should be made for these potential requirements in the initial guidance for PR04. This guidance would be reviewed, if it becomes apparent in the early part of 2003 that there are identifiable and quantifiable new requirements necessitating significant programmes of work.

  26. The most likely scenario is that there is a low to moderate risk that some programmes of work to meet new requirements may be necessary within the AMP4 period, but not known until after PR04 Final Determinations, particularly arising from the first review of the Directive. If so, such programmes of work should be the subject of subsequent logging up, or other financial provision.

    27. Other drinking water requirements for PR04

  27. In the first three AMP Periods, including AMP3, water companies:

    • have carried out extensive improvements to treatment in order to put water into supply that complies with the standards in the 1989 Regulations and the 2000 and 2001 Regulations. These treatment programmes will be completed within AMP3; and
    • have carried out extensive renovation of their distribution systems in order to comply, and maintain compliance, with the standards for iron, manganese, aluminium, turbidity and benzo 3,4 pyrene in the water supplied to premises. Renovation of distribution systems, including completion of pre- and post-renovation assessments, will continue in AMP4 for many water companies. All programmes are scheduled to have completed their construction phases by 2010, although for a few water companies’ post-renovation assessments will continue beyond the AMP4 period.

  28. DWI is concerned that the drinking water quality improvements delivered for consumers by water companies in recent years are not compromised by failure to adequately maintain the industry’s asset base, including new, improved and existing assets. Although the improvement programmes carried out are substantial, we are particularly concerned that many assets were untouched by these programmes; their serviceability was maintained solely by base maintenance.

  29. It continues to be the responsibility of water companies to maintain the serviceability of all their assets, to operate and maintain their supply systems so as to minimise the risk of failure to meet water quality standards, and to maintain service to consumers. In addition, we would draw companies’ attention to the requirement of the 2000 and 2001 Regulations, which will require water companies from 25 December 2003 to investigate not only the cause of failure, but also of likely failure - regulation 17(1).

  30. DWI will expect companies to make adequate provision in PR04 Business Plans to deal diligently with these duties, and advises that such provisions are best made through the recently developed Capital Maintenance Planning/Common Framework methodology. This methodology enables water companies to justify appropriate economic maintenance requirements by taking account not only of historic data on serviceability, but it also enables them to take a forward look by considering the risk of failure to meet requirements.

  31. To ensure that they continue to comply with water quality standards, it is DWI’s expectation that water companies will need to have in place, and to implement, procedures to identify programmes that:

    • in respect of treatment works that did not require improvements and treatment works where improvements have been completed, allow for refurbishment or replacement of treatment processes or items of equipment that have reached, or are approaching, the end of their serviceable life (particularly in respect of processes such as disinfection, clarification/filtration and adsorption on activated carbon that are designed to remove specific substances, and service assets with higher risk of failure, such as pumps, valves, monitoring and control equipment and on-site and off-site telemetry);
    • in respect of service reservoirs, allow for programmes of internal and external inspection and rectification of any deficiencies found;
    • in respect of distribution systems that did not require renovation and distribution systems where renovation has been completed, allow for cleaning and flushing to remove any accumulating deposits, or further renovation if necessary; and
    • in respect of distribution systems where renovation is in progress or has yet to be started, allow for cleaning and flushing to minimise problems pending completion of renovation and allow for cleaning and flushing once the renovation is completed.

  32. To facilitate the development and implementation by water companies of adequate procedures within consistent strategies, DWI is currently considering from water companies submissions of draft operation and maintenance strategies, and is preparing further guidance to water companies on these strategies. Strategy documents should be in place in sufficient time for them to be included in the assessment by water companies of their future operation and maintenance needs for inclusion in their Business Plans for PR04. DWI will expect them to be considered as an integral part of the Common Framework methodology, in particular, for making adequate provision for operating and maintaining supply systems proactively to ensure drinking water quality standards continue to be met. The adequacy of these procedures will continue to be a consideration when DWI assesses drinking water quality incidents.

    33. Scenarios for draft Business Plans

  33. Ofwat has indicated that it should like water companies to present data in draft Business Plan submissions in a format that will enable options to be identified and assessed. The precise formats to be used are still being developed; any guidance required on their completion for drinking water quality matters will be advised as soon as possible.

    34. Likely information requirements.

  34. To facilitate an early start by water companies in the assessment of needs for their Business Plans for PR04, outline guidance on the likely information requirements to support and justify submissions for individual schemes to DWI is provided in Annex A. This is provisional, and subject to change in future guidance from DWI, but it gives an indication of the level of detail that companies might expect to provide to support submissions.

    35. Timetable

  35. In Annex B/1 attached, the timeline diagram sets out the timetable for DWI inputs to the PR04 process. A table summarising key dates is attached as Annex B/2.

    36. DWI advice to Ministers on PR04 matters and a preliminary submission and assessment of PR04 requirements.

  36. It is currently envisaged that Ministerial guidance on PR04 matters will be issued in December 2002. DWI plans to advise Ministers on its input to the PR04 process, and on the drivers, scenarios and timetable for dealing with drinking water quality issues, to inform this guidance. The DWI submissions to Ministers will be made by 11 November 2002.

  37. To enable DWI to provide advice to Ministers, it was agreed at a meeting with water companies on 20 August 2002 that water companies would provide DWI with a preliminary submission of their assessment of the programmes needed to meet the drinking water requirements for PR04. This submission should be the current best estimate by the water company of the individual schemes it anticipates will be required, and their costs. Clearly at this time, only outline information is necessary to estimate the scale of water quality improvements required. These submissions should be made by 25 October 2002. Templates for the submission of information are provided in Annex C. Companies may provide a range of expected costs in the templates if preferred, provided that the ranges are reasonable.

  38. Some water companies, in their responses to Information Letter 13/2002, sought greater specification of options for lead pipe replacement programmes. Water UK, on behalf of the industry representatives on the Lead Working Group, has further developed this point, and made a number of helpful suggestions as to a suitable approach, which forms the basis for the following guidance.

  39. Water companies should make their best estimates of the content and costs of:

    • replacing all water company lead communication pipes in water supply zones, where after treatment is optimised it expects >10% of RDT lead samples would exceed 10ug/l;
    • replacing all water company lead communication pipes in water supply zones, where after treatment is optimised it expects that >5% of RDT lead samples would exceed 10ug/l;
    • for benchmark purposes, replacing all company lead communication pipes; and
    • for benchmark purposes, extending plumbosolvency treatment to all water treatment works supplying serving areas with any lead pipes.

  40. For the purpose of this exercise it should be assumed that:

    • the estimates are based on current advice about optimisation of plumbosolvency measures;
    • all water company lead communication pipes are replaced in whole water supply zones in the areas of supply included;
    • costs are based on carrying out multiple replacements in large scale strategic programmes of work;
    • the costs are based on simple average unit costs multiplied by the estimated number of water company communication pipes in the relevant water supply zone (i.e. no separate provision at this stage for long side or short side);
    • the costs are incurred to an even profile over the AMP4 period only; and
    • the costs to make provision for the additional management and incidental costs associated with planning works with local authorities and lane rental.

  41. The guidance in this Information Letter will be reassessed when further Ministerial guidance is available. We anticipate that DWI will provide further guidance on PR04 issues, on receipt of Ministerial guidance, by 30 January 2003.

    42. Communication

  42. DWI suggests that working level meetings be arranged with water companies, as necessary, during October-December 2002, with a view to clarifying issues as much as possible before the more intensive period of activity commences in 2003.

    43. Enquiries

  43. Enquiries about this letter should be addressed to Milo Purcell (020 7944 5993), or milo.purcell@defra.gsi.gov.uk. This letter is being sent electronically to Board Level and Day-to-Day contacts, and to PR04 contacts. Please acknowledge receipt by e-mail to DWI.enquiries@defra.gsi.gov.uk. Hard copies are not being sent. This letter may be freely copied.

  44. Copies of this letter are being sent to Pamela Taylor, Chief Executive, Water UK; Rodney Anderson, Water Supply and Regulation Division, Department for Environment, Food & Rural Affairs; Bob Macey, Environmental Protection Division, Welsh Assembly Government; Tim Hooton, Drinking Water Inspectorate for Scotland; Randal Scott, Drinking Water Inspectorate for Northern Ireland; Rowena Tye, Office of Water Services, and the Chairpersons of WaterVoice committees.

Yours sincerely

Michael Rouse
Chief Inspector

Attachments:

The following documents are available in Adobe Acrobat format for download. The Adobe Acrobat Reader can be freely downloaded.

Annex A
Annex B1
Annex B2
Annex C

 
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Published 16 October 2002
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