Are water companies doing enough to tackle leakage?

More than half of the water companies in the UK reported a rise in leakage levels last year, yet all of them met their leakage targets. Does this mean the targets need to be tougher?

In a recent report, it says the water sector saw a “disappointing” increase in leakage of 0.7 per cent in 2015. With less than half the companies managing to reduce their leakage levels, CCWater has questioned whether the rate of decline is quick enough to meet customers’ expectations.

Some customers, particularly in areas where resources are more stretched, say they want companies to do more to reduce leakage – but don’t want to pay more for it. Despite a drop in leakage levels of almost a third since its worst point in the mid-1990s, the problem of remains a large one.

“Stretched resources is one of the biggest challenges facing the sector,” says Ofwat. “And we are now looking to learn the lessons from our 2014 price review by having the conversation about how we can ensure the approach to leakage helps contribute to resilient services in the future.”

Water firms acknowledge that leakage is a key concern for customers and have made commitments in relation to leakage over the next five years, says CCWater. But chief executive Tony Smith says that if the sector wants consumers to take water efficiency seriously, water companies “need to show more ambition in tackling leakage”.

The regulator currently requires water companies to fix leaks as long as the cost of doing so is less than the cost of not fixing the leak – which includes environmental damage and the cost of developing new water resources to compensate for the water lost through leaks. This approach is called the sustainable economic level of leakage (SELL), which Ofwat argues gives consumers the “best value for money”. However, companies can move beyond the SELL if they can show that this reflects customers’ priorities or has customer support. And, Ofwat points out, some companies are already doing this.

“Overall the majority of companies have committed to reductions, committing to a drop of 5 per cent by 2020,” an Ofwat spokesman tells Utility Week. “Yet now companies need to deliver. If they don’t meet customers’ expectations, they will lose out, with penalties totalling up to £500 million across the sector for underperforming on leakage.”

Companies have individual targets based on the sustainable economic level of leakage in their distribution network. If companies do not meet their leakage targets, Ofwat can take action. But CCWater questions whether the targets themselves are stringent enough, and suggests companies strive not only to meet them, but to beat them.

The group’s head of policy and research, Deryck Hall, says that while customers accept there will be some leakage in the system, many households want to see companies doing much more to reduce leakage. But they have also made it clear they are not willing to foot the bill, because they see leakage reduction as part of the company’s day-to-day activities.

“Having heard this message, water companies are having to decide how they can meet customer expectations while not increasing bills,” he says. “This includes being innovative in finding and fixing leaks, but also demonstrating to customers that they are taking leakage reduction seriously.”

Firms insist they do take leakage “extremely seriously”. “The recent price review, and the extensive customer consultation companies carried out as part of that process, enforced the message that leakage is a lens through which customers view a lot of company activity,” a spokesman for Water UK, the representative group for the sector, tells Utility Week.

Severn Trent Water is noted in the report as having reduced leakage by 10 per cent over the past five years. However, the company acknowledges that it “needs to do better”, telling Utility Week that driving down leakages is one of its “top priorities”.

“[This] is why we aim to cut leaks by a further 6 per cent in the next five years and are also the only water company that has committed to fixing all visible leaks within 24 hours by 2020,” a spokesman says. “In order to do that we’re looking to drive greater innovation and efficiency by investing in new smart network initiatives and in developing improved leak detection techniques to find and fix issues more quickly, so helping us provide an even better service to our customers.”

Despite these efforts, leakage levels have continued to creep up since an industry low in 2011/12. CCWater’s report points out that since then, only three companies have been able to maintain leakage below their reported 2011/12 levels: Severn Trent Water, Bournemouth Water, and Portsmouth Water. And in terms of actual leakage levels, only six companies have seen a decrease in 2014/15: Dee Valley Water, Portsmouth Water, Southern Water, Welsh Water, Anglian Water, and Bournemouth Water.

Thames Water puts its increase in leakage in 2015 down to the colder winter weather, which caused many of the cast-iron pipes to contract and burst. “Performance in 2014/15 was impacted by a colder than average start to the year and a period of very high summer demand, which required additional pumping to address,” it says. “These factors significantly increased leakage levels during the first half of the period. Recovery plans were put in place, aided by a milder than average end to the year.”

The company says it has taken into consideration the preferences expressed by customers via consultation panels, with improved plans for 2015-20 including a further reduction in leakage levels of 59 million litres per day.

However, according to CCWater: “Companies have got to reduce leakage, and beat – not just meet – their targets. Some companies are committed to doing so. All should be.”