Discusión de resultados

Companies proposed investment of £1.4 billion for drinking water improvements and £4.1 billion for improvements to environmental quality. The CIS baseline allows for investment of £1.1 billion investment on drinking water and £3.4 billion on environmental quality.

We have challenged schemes that were poorly scoped, or lacked clear outputs or statutory drivers. We have done this within the context of comprehensive and clear guidance from Defra, the Welsh Assembly Government, and the quality regulators. Our challenges are informed by the CBA that companies carried out, particularly in relation to the links made with customers’ willingness to pay. We have not automatically excluded or adjusted non-cost beneficial statutory schemes, but we have used the results to indicate where we needed to look more closely at a proposed scheme. We have also used CBA to inform our decisions on proposals for discretionary investment (that is, investment without a statutory basis). Throughout the process, we have worked with the relevant quality regulator to improve our understanding of the basis for, and the interpretation of, the relevant legal obligation.

Our challenges took a number of forms, depending on the strength of the company’s case (including the reporter’s comments) and the views of the quality regulators. These can include specific cost challenges where the scope of a scheme had not been fully worked out or supporting evidence was lacking, through to complete exclusion where we were not convinced a case exists (for example, where there are two schemes intending to produce the same output, or where the scheme should have been completed in 2005- 10). We have also capped costs, or challenged unit costs and timing where appropriate in our CIS baseline. In some cases, we have excluded schemes on a two-sided basis (as set out in section 4.2).

Tables 34 and 35 below show the capital expenditure (after efficiency assumptions), analysed by driver, to improve drinking water and environmental quality included in the CIS baseline.

Table 34 Expenditure under the drinking water quality, environmental and other obligations (post-efficiency) Capital expenditure 2010-15 (£m) Additional operating expenditure by 2014-15 (£m) Water treatment

Nitrate removal – to reduce high nitrate levels caused by

diffuse pollution present in sources of water used for the

drinking water supply 70 1.2

Plumbosolvency control – conditioning of the water supply

so it dissolves less lead from companies’ and customers’

pipework 7 0.5

Trihalomethane reduction – changes to company assets to

reduce the level of by-products of disinfection to comply with

water quality regulations 37 0.4

Turbidity reduction – to improve the clarity of the water

supply 5 0.0*

Cryptosporidium risk reduction – required measures to

companies’ assets to reduce contamination from

cryptosporidium 89 2.0

Pesticide removal – to reduce pesticides levels present in

sources of water used for the drinking water supply 42 0.8

Other – other work supported by DWI at water treatment

works 88 1.3

Water distribution

Lead communication pipe replacement – replace

companies’ pipework, where necessary to help meet lead

standards at customers’ taps 100 0.2

Other obligations

Schemes to improve acceptability of drinking water to

consumers – for example, colour, taste, odour 171 0.0*

Security and Emergency Measures Direction – schemes

to protect assets and maintain supplies during emergencies 369 3.8

Water quality monitoring investigations 7 0.6

Miscellaneous 12 0.2

Environmental obligations

Habitats and Birds – compliance with EU Directives through

reducing water abstraction affecting valuable nature

conservation sites and threatened species 47 0.3

Countryside and Rights of Way Act 2000 – reducing water

abstraction affecting sites of special scientific interest 7 0.1

UK Biodiversity Action Plan – reducing water abstraction to

further the conservation of biodiversity 24 0.0*

Water Framework Directive – schemes to implement river

basin management plans to be approved by UK Ministers in

order to meet EU WFD requirements 12 0.3

Local priority – changes to water abstraction of significant

local importance 7 0.0*

Interaction with 2005-10 quality programme

Projects from 2005-10 to be completed in 2010-15 14 0.1

Programme for drinking water, environmental and other

obligations 1,107 11.5

Notes:

* Figures shown as £0.0m because of rounding. Totals may not add because of rounding.

Table 35 Expenditure under the environmental quality programme (post-efficiency)

Capital expenditure 2010-15 (£m) Additional operating expenditure by 2014-15 (£m) Compliance with EU directives

Urban Waste Water Treatment – upgrades to sewage

treatment works to produce cleaner discharges to the

environment 547 15.3

Unsatisfactory intermittent discharges – to limit pollution

from combined sewer overflows, emergency overflows and

storm tanks 985 11.0

Groundwater – investigations and improvements to treated

effluents and intermittent discharges which may affect

groundwater 104 1.9

Freshwater Fish – reduction in levels of pollutants,

principally ammonia in discharges from sewage treatment

works to allow more favourable habitats for fish 379 7.8

Bathing Waters Directives – investigating and improving

sewage treatment works and overflows to assist compliance

with EU microbiological standards 220 2.7

Shellfish Waters – reduction of microbiological pollution to

ensure a suitable environment for shellfish 86 3.0

Habitats – improvements in quality of discharges to

safeguard valuable nature conservation sites and threatened

species 108 2.5

Water Framework Directive – schemes and investigations

in accordance with the river basin management plans to be approved by UK Ministers in order to meet WFD

requirements. Typically covers objectives for ammonia, phosphorus, biochemical oxygen demand and dissolved

oxygen standards in rivers and discharges to groundwater 78 2.4

Water Framework Directive (Chemicals) – investigations to

quantify risk from chemicals, assess catchment sources and

assess treatment options 42 Nil

National legislation and policy initiatives

Countryside and Rights of Way Act – investigations and

improvements to the quality of water affecting sites of special

scientific interest (SSSIs) 20 0.2

Biodiversity Action Plan – water quality improvements and

studies to meet conservation targets under the UK

First-time sewerage – connecting properties to the public sewerage system to address actual or potential

environmental or amenity problems caused by the existing

drainage arrangements 139 1.6

Local priority – improvement schemes and studies that are

of significant local importance 46 2.4

Environmental Permitting Regulations – schemes to

provide first time combined heat and power (CHP) or

pollution prevention measures 45 1.2

Sewage sludge management – schemes to address the

impact of extending designations of nitrate vulnerable zones 116 0.8

Sustain planned level of environmental protection –

improvements needed to ensure continued achievement of standards established at previous price reviews (for example,

dealing with misconnections) 1 0.2

Discharge flow limit increases – schemes identified to

ensure no deterioration in the current classification of water

as a result of increased volumes of sewage 238 3.3

Security and Emergency Measures Direction – schemes

to protect assets and assessments of further improvements

needed beyond 2015. 28 0.2

Sub-total – new work identified for 2010-15 3,185 56.5

Other, including interaction with 2005-10 quality programme 207 1.7

Quality programme for the sewerage service 3,392 58.1

Note:

Capital and operating expenditure totals might not add because of rounding.

Our final price limits do not include those Water Framework Directive schemes that we judge Ministers may exclude on the grounds of disproportionate cost (see section 3.2.12). Ministers will not make final decisions on the river basin management plans for 2010-15 until December 2009. Affected companies will therefore be able to use the established mechanisms set out in the AMP5 change protocol (see section 5.3) in the event of any changes to statutory obligations that we are unable to reflect in price limits. Ministers will also confirm the final version of the NEP after we have set price limits. Companies will be able to deal with any resulting changes to investment requirements in the same way.

4.5.2 Lead in drinking water

Table 29 sets out the costs we have allowed to deal with lead problems. Our approach to this has been to continue to support plumbosolvency treatment and targeted

replacement of company-owned lead communication pipes in high-risk zones, along with schemes to provide advice to customers on lead pipes. However, we have not assumed any additional (capital or operating) expenditure in price limits to replace privately-owned lead pipes (see section 3.2.11). This would represent a cross-subsidy from customers who have already paid to have their lead pipes replaced. However, we are content for companies to offer the replacement of customer pipes on a rechargeable basis where this is necessary to protect public health.

In response to representations on our draft determinations, we have excluded proposed expenditure on customer owned pipes on a two-sided basis – that is, without affecting the CIS baseline.

4.5.3 Security and Emergency Measures Direction

We have considered a number of proposals for investment relating to the Security and Emergency Measures Direction in both the drinking water and sewerage areas. We have made assumptions having discussed the schemes and costs, and particularly the

phasing of work, with the relevant government authorities.

4.5.4 Catchment management

As we have explained in chapter 3, price limits include the catchment management schemes and investigations that companies proposed in their final business plans. Some of these are subject to cost adjustments, for example, where we believe

companies could have done more to obtain contributions from others who will directly benefit from the work.

4.5.5 Sewage sludge management

Water and sewerage companies proposed approximately £1.5 billion of expenditure to manage the treatment and disposal of sewage sludge allocated across capital

maintenance and enhancement drivers. Price limits include approximately 84% of this expenditure following challenges on:

• scope;

• estimations of growth; • cost benefit; and • scheme costs.

Capital maintenance expenditure allowed was also subject to the AMA challenge discussed in section 4.3.