Information Letter

25 January 2008

DWI Information Letter 02/2008

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

Dear Sir/Madam

The 2009 Periodic Review of Prices – Guidance on Drinking Water Quality Requirements

Purpose

The purpose of this Information Letter is to provide water companies and other stakeholders with guidance on the 2009 Periodic Review of Prices (PR09) for those matters relating to drinking water quality. This letter and annexes describe the criteria and the information for preliminary drinking water quality submissions by water companies that require the support of the Drinking Water Inspectorate for inclusion in Draft and Final Business Plans. It also confirms the methodology that the Inspectorate will use for assessment of submissions and its timetable.

General approach to the drinking water quality programme for PR09

For PR09, water companies are expected to address all statutory drinking water quality requirements as set out in Defra’s recently published Statement of Obligations¹ . In particular, the Inspectorate will look to ensure that companies have paid due regard to the need for public water supplies to be safe, clean and compliant with all the regulatory standards, and that provision is made for a sustainable level of asset maintenance to maintain public confidence in drinking water quality.

Similar expectations apply to the Statement of Obligations to be published shortly by Welsh Assembly Government for those water companies who are wholly or mainly in Wales.

The Regulatory Framework for Drinking Water Quality

Defra’s Statement of Obligations describes the main statutory obligations that apply to water companies who are wholly or mainly in England over the price review period 2010-2015 on the water environment, including drinking water and water supply. The regulatory framework for drinking water quality set out in this section of the letter reflects the statutory obligations for drinking water quality outlined in the Statement of Obligations.

The 1998 EU Drinking Water Directive (98/83/EC) is the primary European legislation that sets standards for drinking water quality.

The Directive was implemented by the Water Supply (Water Quality) Regulations 2000 (in England) and 2001 (in Wales). These Regulations, referred to in this letter as the Principal Regulations, contain all the standards of the Directive together with national standards for aesthetic, chemical and microbiological parameters. All of the standards in the Principal Regulations came into force on 25 December 2003, including an interim standard for lead of 25µg/l. The final standard for lead of 10µg/l comes into force on 25 December 2013.

The Principal Regulations have been subject to a number of amendments. The latest amendments, the Water Supply (Water Quality) Regulations 2000 (2001 in Wales) (Amendment) Regulations 2007 came into force on 22 December 2007. These Regulations are referred to in this letter as the Amendment Regulations 2007. The key purposes of the Amendment Regulations 2007 are set out below:

• The repeal of the Surface Water Abstraction Directive (SWAD) on 22 December 2007 and the need for a continuation of an effective level of health protection for consumers of public water supplies;
• The introduction of a risk assessment approach to management of drinking water supplies;
• A contribution to the Water Framework Directive (WFD) objectives in terms of the raw water monitoring at abstraction points by water companies, which is essential to underpin the risk based approach to drinking water quality management.

Drinking Water Quality Programme for PR09 - Principles

Water companies will need to address the following specific new obligations set out in the Amendment Regulations 2007 when considering drinking water quality proposals for PR09:

• For every water treatment works and associated supply system i.e. from source to tap, the requirement to carry out a risk assessment by 1 October 2008 in order to establish whether there is a risk of supplying water that could constitute a potential danger to human health.
The introduction of a risk assessment approach to management of drinking water supplies;
• The requirement to carry out regulatory raw water monitoring at the point of abstraction for parameters necessary to inform the above mentioned risk assessments.

The risk assessments together with the outputs of raw water monitoring should inform and draw on the WHO Water Safety Plan (WSP) methodology that companies have been developing over the last two years. The WSP should identify all potential hazards in the catchment, and in treatment and supply, that could potentially impact on a Company’s ability to adequately treat, disinfect and supply wholesome drinking water. Wholesomeness is defined in Regulation 4(2) of the Principal Regulations by reference to drinking water quality standards and any other substance or organism alone or in combination with another substance that would constitute a potential danger to human health. Water companies should consider the short, medium and long term control mechanism(s) required to address each hazard and assess whether there is a need for investment at the treatment works or in the associated supply system to secure that drinking water is wholesome at the consumers’ taps and risks to human health appropriately mitigated. It should be recognised that many risks may be under control already through operational and communications control measures and the case for investment may relate to improving the reliability, resilience, and/or sustainability of such controls.

There are no significant changes to the existing drinking water quality standards set out in the Schedules to the Principal Regulations although companies should note that the taste and odour standard has been revised to bring it into line with the 1998 Drinking Water Directive.

For PR09, water companies will need to consider whether improvements are required in the area of catchment control, or with the treatment processes at works and in the distribution system to ensure the requirements set out in the Principal Regulations and the Amendment Regulations 2007 are being achieved and will be maintained during the period from 1 April 2010 to 31 March 2015 and beyond.

Provision of information to DWI - for Draft Business Plans

The outcome of the risk assessments of water treatment works and associated supply systems referred to above will provide the supporting information for any drinking water quality scheme proposals that water companies submit at PR09. However, the Inspectorate recognises that the latest date for submissions of the risk assessments (1 October 2008) comes after the date for publication of Draft Business Plans (DBPs). Therefore, for DBPs, the Inspectorate expects companies to provide preliminary scheme proposals arising from a risk based approach to looking at their water treatment works and associated supply systems drawing on their WSP methodologies.

The case for justification must be accompanied by the following information:

• how the company has derived the most appropriate technical and cost effective options to mitigate each named hazard and thereby achieve compliance with the regulatory requirements;
• summary details of the capital costs and the net additional operating costs of each of the options considered; and
• identification of the preferred option and the rationale for choosing that option and reasons for discounting all other possible options.

Ofwat has indicated in its draft PR09 methodology paper² that companies are likely to be required to undertake cost benefit analysis on all components of the proposed investment programme including those required to deliver drinking water quality statutory obligations. Assuming Ofwat confirms this requirement in its final methodology paper, for drinking water quality submissions, water companies must describe the costs and the benefits that the project will deliver. Companies’ analyses should include an assessment of all relevant benefits including the benefits of provision for protection of public health, and maintenance of public confidence in drinking water supplies. These benefits should be assessed qualitatively, quantitatively and where possible, monetized.

For PR09, Ofwat has asked water companies to outline for consumers, regulators and other stakeholders their long term approach to regulation and planning in a 25 year Strategic Direction Statement (SDS). Water companies’ proposals for draft and final business plans for PR09 should be set within the context of their SDS. The Inspectorate will specifically review all drinking water quality scheme submissions for PR09 to ensure consistency with a company’s current SDS and to ensure that consumers’ priorities for drinking water quality as identified through company and joint stakeholder-led consumer research have been considered. It is recognised that the SDS will need to be reviewed regularly.

DWI methodology and timetable

Annex D sets out the timetable for the Inspectorate’s input to the PR09 process. Key dates for DBPs are as follows:

• Preliminary scheme submissions for the drinking water quality programme for PR09 should be made to the Inspectorate no later than 31 March 2008.
• The Inspectorate will assess preliminary submissions for inclusion in DBPs and provide feedback to water companies – by 30 April 2008.

As mentioned above, annexes to this letter set out the information requirements for preliminary submissions for DBPs. The Inspectorate will confirm subsequent proposals for Final Business Plans on the basis of the risk assessments for each water treatment works and associated supply systems which are required to be submitted by companies no l ater than 1 October 2008. Further guidance on information required for final submissions for companies’ drinking water quality programme will be provided in September 2008.

The transposition of supported scheme proposals into formal programmes of work will reflect the regulatory position as set out in the Principal Regulations and the relevant sections of the Water Industry Act 1991 (updated by the Water Act 2003). Where there is evidence of current failures of a standard for a parameter linked to a hazard identified through the risk assessments, this may require the use of authorised departures or, in exceptional circumstances, enforcement orders. In addition, section 19 undertakings can be used to secure compliance with certain national parameter standards. However, for outcomes of the risk assessments that indicate a potential hazard or likelihood of failure of certain EU or national standards for a parameter linked to a hazard, section 19 undertakings can be used under regulation 17 or 18 of the Principal Regulations. Further information on the detailed arrangements for the implementation of the drinking water quality programme will be provided in December 2008.

Enquiries

Copies of this letter are being sent to Pamela Taylor, Chief Executive, Water UK; Richard Wood, Water Supply and Regulation Division, Department for Environment, Food and Rural Affairs; Claire Bennett, Climate Change and Water Division, Welsh Assembly Government, The National Assembly for Wales; Colin McLaren, Drinking Water Quality Regulator for Scotland; Randal Scott, Drinking Water Inspectorate for Northern Ireland; David Lowe, United Kingdom Accreditation Service; Tony Smith, Consumer Council for Water and Rowena Tye, Water Services Regulation Authority (Ofwat).

Enquiries about this letter should be addressed to Claire Pollard (020 7270 3395), or claire.pollard@defra.gsi.gov.uk. This letter is being sent electronically to Board Level and Day-to-Day contacts, and to PR09 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.

Yours sincerely

Claire Pollard
Principal Inspector (Regulations)

Attachments:

AnnexA     - Proposals to carry out improvements for drinking water quality reasons - submission of information
AnnexB     - Foundations of the WSP approach
AnnexC     - Drinking Water requirements for PR09 - specific hazard/driver information
AnnexD     - DWI methodology and timetable