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Running water the green way

Over the next five years water spending will focus on environmental improvements rather than capital maintenance. Nina Lovelace explains why.

Before Ian Byatt's departure as director general from the Office of Water Services in August this year, he set about compiling his final challenges to the water companies for the next five years in his November 1999 Periodic Review.

As he watched the water and sewerage companies roll into their second decade in the private sector, his message to the companies was still the same: be more efficient and lower your prices - by an average of 12% between 2000 - 05.

However, Byatt also added a new agenda: the water companies must comply with the Government's National Environmental Programme, compiled by the Environment Agency and announced the previous May.

A large and prestigious programme headed by minister for the environment Michael Meacher, the NEP is designed to guide the UK's water and sewerage companies towards the new quality and environmental regulations set by the Environment Agency and the European Union.

The programme, which was incorporated into the Periodic Review, has set water companies deadlines to stop discharging raw sewage, improve water quality for coasts, rivers and lakes and meet EC quality directives on drinking water, bathing water and urban wastewater.

These demands have been reflected in the water companies' business plans for 2000-05.

Out of a total £15bn planned investment over the next five years, over one third - £5.3bn - has been put aside for the NEP.

Water companies say the NEP requirements demand 'massive spending' on new or improved combined sewer outfalls, water and wastewater treatment works, and the replacement or repair of thousands of water mains and sewers. On a smaller scale, companies are also spending on sewage sludge disposal and recycling, abstraction control and sewer flooding incidents.

Although the NEP is a positive move for the environment and the customer, it only adds to the squeeze on the water companies, by digging further into what they claim are already stretched pockets.

Many water companies have already complained to Ofwat they are unable to lower prices further and carry out the investment demanded.

They feel constrained by the lack of funds - capital maintenance expenditure that can directly affect customers.

'What about customers who are regularly exposed to sewer flooding, due to our changing weather patterns?' says Graham Setterfield, director for water services at trade association Water UK.

'This is a customer problem too, it's not just prices. The water companies feel that on these issues Ofwat has lost touch with the customer.'

Setterfield continues: 'Capital maintenance has been cut by about £1bn. The water companies were expecting to get a bit back in order to carry out capital maintenance, but have instead been hit harder than they anticipated.'

Ian Whitear, strategic issues manager for Kelda, adds: 'By the end of 1999, we had spent £810M on capital maintenance over the previous five years. But £570M is the sum we've put aside for 200005.'

He goes on: 'The reduction is not because we think we don't need it. We just need to prioritise our funds to get the best value that we can for our customers.'

In Scotland

Rather like the Roman invasion, privatisation never quite made it over the border.

By remaining publicly owned, the Scottish water authorities in the north, west and east have ended up poorer than their English and Welsh counterparts. Privatisation relieved the English companies of their previous public debts, freeing them up to spend more on their water and wastewater infrastructure. Not so for Scotland, which is still servicing its debts.

'We are up to five years behind our English counterparts, ' says a senior manager at one of the Scottish Water Authorities. 'Water authorities have no shareholders so their focus remains on the customer. In England and Wales, the City has had high expectations from the water companies and if they don't meet them, it leaves the companies open to take over, such as the situation with Hyder.'

The Scottish water authorities also have their own regulator - the Water Industry Commissioner for Scotland and both regulator and water authorities answer directly to the Scottish Executive.

'We both work for the same person and have the same objectives, ' explains the senior manager. 'WICS believes in the 'stewardship' approach, in which it focusses on long term ownership and correct maintenance, whereas Ofwat believes in serviceability - that is, it is only interested in the service provided to the customers. Ofwat doesn't really care about maintenance.'

Scotland's approach currently lacks incentives for efficiency, however. This is a situation that the Scottish water authorities believe will change with recent moves towards increased competition.

'We must become more efficient, or our customer base will erode. But in Scotland we will eventually get the best of both worlds.'

Scotland does not work to the same five year cycle for capital investment and instead works to a two year Strategic Change Review. The next Review, however, is expected to be a four year programme.

The Scots are expecting to spend about £1bn in east Scotland, £800M in the west and £1.3bn in the north in its next four year programme. Its spending trends are expected to follow a similar pattern to England and Wales.

How will the next five years affect engineers

Civil engineers can expect the amount of work they have been receiving from the sewerage and water industry to remain constant over the next five years, but may notice a change in the size of the projects they are carrying out, according to the water companies.

'Engineers won't be working on the large jobs, ' says a spokesman for Northumbrian Water, adding that many of the water companies have already spent a lot on large quality improvement projects since privatisation in 1989.

'Instead, they can expect to be working on a larger number of smaller jobs, rather than the larger schemes seen previously.'

This in turn will affect the amount of time and effort on tendering, and also the size and management of project teams.

What engineers' work will entail will reflect the NEP, but depends in part on the geographical location of the water and sewerage company. Pennon, for example, has one third of the UK's designated coastal bathing waters within its area and is still continuing with major infrastructure work.

How well the water company performed in the previous Periodic Review will also affect engineers.

Anglian Water, for example, has already managed to complete virtually all of its drinking water quality projects, and expects to spend only 5% of its total expenditure on this sector over the next five years.

However, engineers can expect to have further demands put on them by water companies to become more and more innovative in the ways they work, to comply with Ofwat's calls for greater efficiency.

'Innovation will be where the companies differentiate themselves, ' says Setterfield.

However, he adds, there is a strong chance that capital maintenance work will have to be carried out in the future, and engineers should be mindful of this.

'The NEP gets lots of ticks in the box, ' he says. 'But capital maintenance is the hidden problem.'

Follow the money

United Utilities (North West Water)

Total expenditure: £3bn.

£1,200M is to be spent on building and improving around 180 wastewater treatment works and new sewers.

£700M is to be spent on building or improving around 80 water treatment works and replace over 4,000km of water mains in a bid to improve water quality.

£460M will be spent on maintenance of existing sewers and waste water treatment works.

£150M will be spent on improving customer service by reducing the risk of foul flooding and improve water supply system.

More than 900 sewer overflows are to be removed or improved - more than three times the number replaced in previous years.

Severn Trent Water

Total expenditure: £1M a day for the next five years - almost £2bn.

Severn Trent intends to spend £390M on the West Midlands alone, with much of the cash being directed towards water main improvements and improving sewer overflows across Birmingham and the Black Country.


Total expenditure: £1.85bn (excluding infrastructure renewals).

Included in Thames' plans are improvements to river water quality and greater protection to fish through improved wastewater treatment at 102 sites. They also are improving discharges at a further 57 sites.

Thames is also continuing to improve sewage sludge disposal standards, deal with abstraction issues and hope to reduce the risk of sewer flooding to 1,500 properties.

Kelda (Yorkshire Water)

Total expenditure: £1.5bn £757M - just over half - is being invested in water quality.

£524M of this is directed towards wastewater however, as Kelda continues to tie in with the European Union and Environment Agency regulations.

£565M is going towards capital maintenance, which will be balanced equally between water and wastewater infrastructure.

£116M will be invested in supplying new customers.

£15M will be used to improve levels of service to customers, such as reducing the occurrence of sewer floods.

Anglian Water

Total expenditure: £1.4bn £910M is to be put towards water and wastewater maintenance, and new customers.

£420M is to be directed towards new and improved wastewater treatment works.

£70M will be put towards improving drinking water quality - a relatively small sum reflecting that Anglian is well ahead in their water quality programme.

Hyder Total expenditure: £ 1.1bn.

£300M on storm overflows.

£260M on capital maintenance.

£240M on sewage treatment.

£200M on water mains and treatment works.

£90M on new customers and metering.

£10M on improving service to customers.

Southern Water

Total expenditure: £1bn.

£800M of this will be aimed at further raising wastewater treatment standards in a series of small projects, rather than the larger schemes completed in AMP2. These small projects - representing '99% of the workload' - will tackle sewage treatment levels in coastal areas, improve drinking water supplies and improve wastewater returned to rivers.

Wessex Water

Total expenditure: £765M.

Wessex predicts that approximately one third of this investment is for water supply projects, whereas two thirds is earmarked for wastewater.

The main areas of work will take place in drinking water mains rehabilitation and improvements to waste water treatment works, the sewerage network and sewage sludge treatment.

Northumbrian Water

Total expenditure: £730M.

£286M of this will be spent on sewage treatment and sludge recycling, including £20M towards a major extension to the regional sludge recycling centre on Teesside.

£187M is being spent on water main improvements, leakage and meters to improve 2200 km of mains.

£120M is directed at water quality and treatment to spend on improvements to Northumbria's 15 water treatment works and to tackle lead in drinking water.

£87M is to be spent on sewers, overflows and flood mitigation, as Northumbria continues to renovate and replace 700km of old sewers.

£50M is being spent on new development to serve new industrial, commercial and residential areas.

Pennon Group (South West Water)

Total expenditure: £725M.

Much of this cash is to be spent on the continuation of its water mains rehabilitation programme Cleansweep.

It is also continuing to improve the quality of coastal wastewater discharge by a number of infrastructure projects, most notably its £95M spend on a new modern sewage treatment works at Torbay. The aim is to stop all crude sewage discharge by March 2001.

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