presented by: steve finnemore
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POLITICS OF WATERPRESENTED BY: STEVE FINNEMORE
3 MAY 1979
POLITICAL LANDSCAPE
ECONOMIC LANDSCAPE - DEFLATIONARY
60
70
80
90
100
110
120
1978 1979 1980 1981 1982 1983
Ind
ex o
f P
rod
ucti
on
2009 b
ase i
nd
ex
UK Industrial Output UK Current account % of GDP
WATER INDUSTRY INVESTMENT
DIRTY MAN OF EUROPE !
Little desire for additional government funding
Ailing and neglected infrastructure
Low service levels
Excessive pollution incidents
“Dirty Man of Europe”
THIRD TERM - PRIVATISATION
UK WATER REFORMS
Significant capital expenditure required:– Bathing Water Directive– Drinking Water Directive– Urban Wastewater Directive
Water Act 1989– Water authorities
transferred to limited companies
– Floated on London Stock Exchanged
– Injection of public capital – Write-off of public debt
WATER REFORM IN ENGLAND AND WALES
1989
Ten Private Water and Sewerage companies
14 Private Water only Companies
INDUSTRY STRUCTURE
Central Guidance:– Department for Environment Food and Rural Affairs (DEFRA)
Regulators:– Environment : Environmental Agency– Drinking Water Quality : Drinking Water Inspectorate– Economic : OFWAT
Planning and Investment– Asset Management Periods (AMP)– Guidance issued by DEFRA– Business plans from Water Companies– “Price review” by OFWAT
AMP 1 to AMP 6
REFORM IMPACTS – PERFORMANCE GAINS
Massive Capital Investment
By 2005 99.96% of drinking water met National and European standards
By 2012, leakage reduced by 35% (cf 1990 levels)
By 2013, 81.3% of bathing sites met more stringent EU standards (up from 54% in 2000)
CHANGING POLITICAL FORTUNES
POLITICAL LANDSCAPE
LANDSCAPE IN SCOTLAND
Landslide Labour Government
Eradication of Torys in Scotland• Torys seats 22 (72) => 0(72)• Labour seats 44 (72) => 56(72)
>90% opposed to privatisation – politically off limits
PERFORMANCE CHALLENGE
Huge challenge to meet EU Directives
Sewage main cause of pollution of water bodies – in NOSWA only 34% of population received secondary treatment
Beaches failing to meet standards
Drinking water quality inferior to England – with new standards in 2004
Poor Service quality –interruptions & low pressure
Slide Courtesy of Bob Irvine
REPUTATIONAL CHALLENGE
Slide Courtesy of Bob Irvine
SCOTTISH WATER REFORM
Industry consolidation
1994 - 9 Regional + 3 Island Authorities => 3 RWA
2002 - 3 RWA amalgamated to Scottish Water
5 million customers with 3,500 staff
280 WTP PLUS 1800 STPs
£1 billion turnover
£500m p.a capital investment programme
INDUSTRY STRUCTURE
Central Guidance:
– Scottish Parliament
Regulators:
– Environment : Scottish EPA– Drinking Water Quality : Drinking Water Regulator Scotland– Economic : Water Industry Commissioner Scotland
Planning and Investment
– “Quality and Standards” Guidance issued by Scottish Ministers– Business plans from Scottish Water (lowest overall cost)– “Price review” by WICS
REFORM IMPACTS – PERFORMANCE GAINS
By 2012 (10 years) 99.88% of drinking water met National and European standards
By 2013, levels of leakage 50% lower than 2002 levels
By 2013, number of STPs failing UK/EU standards reduced from 78 to 2
By 2013, number of bathing sites meeting mandatory EU standards increased from 31 out of 60 to 71 out of 83
PRICE BENCHMARKING
WATER AND SEWERAGE COMPANIESAVERAGE HOUSEHOLD BILL 2015/16
South West £482
Wessex £460
Welsh £435
United Utilities £411
Southern £410
Anglian £402
England & Wales Average £385
Northumbrian £371
Thames £367
Yorkshire £360
Scottish Water £346
Severn Trent £329
REFORM ENABLERS
Sector under funding stress impacting performance
Historical structures comprising dedicated water entities
Political Mandate & Capital to change
THE POLITICS OF WATER
SO WHAT ABOUT NZ
STRESSES IN NZ
3 WATER REVIEW
Operating Environment Challenges
Insufficient infrastructure funding to support housing in high growth areas
Declining rating bases and / or high seasonal demand in rural areas
Bow-wave of aging infrastructure
Increasing community expectations and regulatory requirements for water quality, treatment & management and national directions on fresh and coastal water quality
Climate change, and infrastructure resilience
NZ POLITICAL LANDSCAPE
2011 – National Led4 Party coalition3 seat majority
2014 – National Led4 Party coalition3 seat majority
2017 – Labour Led3 Party coalition3 seat majority
67 Entities
Most responsible
for multiple asset
groups including
roads and
community
facilities
HISTORICAL STRUCTURES
3 Dedicated
Water
Entities
COMPARISONS ARE DANGEROUS !!
MMP vs First Past Post
– Coalition Government– Limited Majority– Consensus Government– Limited Political capital for change
Historical structures
– Local Government vs Water Authority – More comprehensive and disruptive reform– Asset ownership transfer– Stranded Asset Risks
WHAT CAN WE LEARN ?
Not about political ideology
Its about the long-term prioritisation of outcomes and investment areas
Empowered and incentivised regulation
Access to long-term investment funds
WHAT CAN WE FORECAST
Reform has potential to be disruptive
Political capital may be tested
Structural change must be inclusive, collaborative and embrace consensus
Regulation must incentivise compliance
Funding mechanisms must accompany reform
Our journey is just beginning !!
BUMPER PROFITS & WINDFALL TAX
Windfall Tax Labour Manifesto 1997
REFORM IMPACTS – PRICE REVIEWS
PR895% above inflation
PR94 1.5 - 4% above inflation
PR 9912% reduction price stability
SCOTTISH WATER - INVESTMENT
£1 Billion already spent on environmental control measures (£ 600 million next 6 years)
Running £500 million per year (£3.5 billion next 6 years)
COMPARISONS WITH NZ – GUIDANCE
England & Wales SoS Guidance via DEFRA “Strategic Policy Statement”
Scotland Scottish Parliament Guidance “Quality and Standards”
New Zealand MoH – Drinking Water StandardsMfE – NOFs & NPS-FM 2014
DWS, Environmental bottom lines, Freshwater Management
COMPARISONS WITH NZ – REGULATION
England & Wales
Drinking Water Inspectorate
Environment Agency OFWAT
Scotland Drinking Water Regulator for Scotland
Scottish EnvironmentProtection Agency
WICS
New Zealand DHBs 11 Regional Councils5 Unitary Authorities
District CouncilsUnitary AuthoritiesCCOs
Local autonomy and solutions Customer Focus and Accountability
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