12 March 2006

JM Thorn
 

The continuing scandal of water privatisation in England has hit the headlines again in recent weeks with news that a water company in Kent has been granted permission to install compulsory water meters, and that another knowingly overcharged its customers. 

Compulsory water meters in Kent

Folkestone and Dover Water was granted permission by the Government run Environment Agency to force 65,000 householders to install water meters.  It applied for “water scarcity status” because of the drought affecting the south east of England.  Water firms can apply for water scarcity status under the Water Industry Regulations Act 1999.  It is the only basis on which suppliers can force their customers to have meters installed, after the government stripped suppliers of the right to impose them without this status six years ago. 

The application by Folkestone and Dover Water is the first one of its kind by a water company under the new legislation.  However, it is unlikely to be the last.  Four water firms - Sutton and East Surrey Water, Southern Water, South East Water and Mid Kent Water have already introduced full hosepipe bans, and after the Government ruling, are likely to adopt metering.  In addition, the Environment Agency has announced that it favours compulsory metering in the whole of southern England.

The government’s approval for such measures represents a complete u-turn on its previous commitments.  In 1997, Labour pledged itself to opposing compulsory metering.  This was reaffirmed in its most recent election manifesto that condemned metering as "tax on family life".  However, Labour’s capitulation to the demands of the water companies should come as no surprise given that every other aspect of its programme, from health to education, is designed to give more power to business. 

The claims of Folkestone and Dover Water over water scarcity were not put under any scrutiny at all.  While it is true that there has been lower than average rainfall in the region this year, that is only partly responsible for the drought.  Other factors have been the high level of unregulated house building in the area, and the lack of investment in the water network. The firm has rejected the option of building a reservoir the increase capacity on the basis that it would be not be “cost effective”.  Instead, its solution is water metering.  This is not just a temporary measure.   Meters installed during the period of “water scarcity” will not be removed when the current drought ends.  The company has stated that it wants to have 90 per cent of homes using meters by 2015, and that the bills will rise in the future.

The underlying assumption of the proposals for metering is that water should be rationed by price.  However, the inevitable consequence of metering is that costs will fall most heavily on the poorest householder, who will be spending a higher proportion of their income on their water bill.  It will also have implications for public health as people are deterred from using the water they need, having to think about whether they can flush the toilet run a bath.  In the early years of water privatisation in England, when compulsory metering and disconnections were in place, there were outbreaks of dysentery in some areas. 

The premise on which the argument for compulsory metering is based, that water is scare, is bogus.  While some areas have less water, there is a surplus in others.  An upgraded national water network could solve this problem by transferring water from one area to another.  However this is rejected by the water companies as being too costly.  The main problem with water in England is not a scarcity of water but the refusal of the private water companies to adequately invest in the network.  This has even seen reservoirs sold off or “rested”.  Their priority is not providing a public service or promoting public health but in maximising profits for their shareholders and the salaries of their executives. 

Overcharging

Another example of how water firms are lining their pockets has been the overcharging of customers by Severn Trent Water.  This involved the deliberate miscalculation of data on which the firm’s price plan for the period 2005 to 2010 was based.  This became known when a whistleblower reported the company to the water regulator Ofwat.  After an investigation, it found that the water firm had overcharged by £2 to £3 per household a year, a total of £2m during 2004- 05.  Severn Trent Water has been forced to issue an apology and is to make an average refund of £4 to each customer in their next bill. 

If this case highlighted the greed and duplicity of the water company, it also exposed the ineffectiveness of the regulator.  Ofwat had approved Severn Trent’s price plan, subjecting it to minimal scrutiny.  It was only the exposures of a whistleblower that forced it to launch an investigation.  Also, the consequences of that investigation were very limited for the company.  The amount of money it was forced to return was estimated to be only a faction of what it overcharged.  This demonstrates that the purpose of the regulatory body is not to defend the “public interest” but to ensure the profitability of the companies.

The example of England is a warning to people in the North of what we can expect as the Water Service is moved towards privatisation.  It should also act as an incentive to oppose it while we still have time.