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Columnist of the Year Sydney Lenssen Don't give them a meter

CROSS survey

Working on a World Bank water study in India, a colleague told me a tale of 'meter madness'. To qualify for funding, the city concerned is required to install meters and charge for water supply.

The first snag is that meters, whether cheap or quality instruments, don't work well because of sediments in the water. Within 12 months fewer than one in 10 give any form of reading. The meters which do work are usually in bigger houses using a lot of water. The tariff produces bills which are so large that the company officials are frightened to send them. Such influential customers, they say, can easily arrange to get them sacked.

So the readings are conveniently ignored, and the finance department issues fictitious bills, phased so that over the next decade metered bills might be brought in without protests. My friend tactfully reported the dilemma to the Bank's visiting rep. The Bank official duly reiterated its policy and meters continue to be installed.

That's meter madness. But you don't need to go far to find it.

John Prescott chose 1 April to issue his consultation paper A new approach to water charging in England and Wales. It isn't new, and for all the talk of protection for the poor and customer choice, the Deputy Prime Minister has fallen in with water regulator Ian Byatt's bias for meters.

At present, water companies are still legally required by privatisation legislation to introduce their own methods of charging and abandon rateable values by 2000. Part of Prescott's 'new approach' is to scrap Margaret Thatcher's deadline.

However, the drive to persuade more householders to opt for meters is to continue. Prescott wants meters to be free and for unconvinced customers to be able to switch back after 12 months. It costs about £200 to install a meter and £30 a year to read, maintain and bill using it. So who pays? Answer: the people who don't have meters.

Consistently since 1989, the regulator has encouraged the water companies to bias charges in favour of metered customers, by 45% in real terms and 70% in cash terms, according to independent water policy consultant John Thackray. He has studied the anomalies for, among others, the Public Utilities Access Forum.

Ofwat sees meters as creating a market with supply and demand, a private enterprise philosophy which a Conservative government would be expected to favour. Twice the previous government extended Byatt's term of office.

But water use in the home, particularly among the elderly and infirm, is not price elastic. Even accepting the market philosophy, meters are bad because they do not apportion bills on a proper basis since less than half the cost of services provided are related to water consumption.

Government should insist that the individual water companies submit their own new methods of charging for approval. Encouraging competition in water is harder than in other utilities, but pricing policies are fundamental to comparing performance.

If the water companies had truly embraced private sector status, then they would insist on managing the price mechanism, leaving the regulator to safeguard the public from their monopolist position.

Prescott is in a powerful position. He should insist on the companies detailing their spending to justify their charges, and then penalise any shortfall. He only needs to look to the US to see how tough regulators can be.

The water industry does not exist for the benefit of construction, but civil engineers would be best served if water company directors became proactive. There is still a long way to go with capital investment in water services, and performance standards can still be improved markedly. Real enterprise would see charges rising far slower than the retail price index.

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