Our response to the Environmental Audit Committee call for evidence

CCW is the voice for water consumers, so we conduct a lot of research to really understand customers’ priorities.

A valuable way of spotting when customers’ views on an issue change is CCW’s Water Matters yearly tracker of household views. We have published this report for the last 13 years. This year’s report will be out on 22 May 2024. The report this year shows some stark changes in what people think about water companies.

• Only 35% of people say they are satisfied that their sewerage company cleans water properly before releasing it back into the environment. This is a significant decrease since last year. And in our report from 10 years ago, that figure was 88%.
• 43% of people were satisfied that their sewerage company is minimising sewer flooding – again, a significant decrease since last year. In our 2014 report, it was 85%.
• When asked whether they were confident that longer-term, a water supply will be available without restriction (eg hosepipe bans), 59% said they were. This has fallen since 2016 from 78%, and this year’s figure shows a significant drop from last year. Of the proportion of people who were confident, only 8% trust their water company to manage this.
• How well water/sewerage companies communicate with customers on services and plans shows a significant decrease since last year.
• This lack of trust in delivery is driving down overall confidence in the water sector. The level of trust in water/sewerage companies this year is the lowest score ever measured in our tracker, and again, represents a significant fall since last year.

CCW’s joint Customer Spotlight research with Ofwat, published in April 2024, found that:

• Less than a quarter (23%) of respondents said they trust water providers to do what’s right for the environment – down from 31% in 2021.
• Just 21% believe that water providers actively promote environmental interests – a decrease from 27% in the previous study.

In April 2022, CCW researched people’s awareness and perceptions of river water quality.

• 35% of people in England and Wales see untreated sewage as the biggest cause of river pollution.
• Despite this, people mainly have positive rather than negative associations with rivers and streams.
• In principle, 58% would pay more on their water bill to support investment to reduce the need to use storm overflows, subject to the detail and cost.
• The majority of customers (65%) want planned sewer overflow improvements to ensure that rivers are a healthy habitat for wildlife, versus 10% who want improvements to be planned to ensure that the river is safe for people who want to swim in it.

In terms of how customers want companies to approach fixing pollution problems, CCW published research in January 2024 that showed that households valued a nature-based approach. It identified that respondents would be willing to pay up to £40 a year more on their water bill to use nature-based solutions instead of man-made materials to deliver investment.

Cost was the single most important consideration for people when asked to think about what water companies in England and Wales should be prioritising when it comes to infrastructure projects. But despite cost-of-living pressures, consumers were still willing to make some trade-offs to pay towards environmentally friendly approaches because they recognised they could provide additional benefits.

(CCW has written this response ahead of Ofwat publishing its draft determinations on 12 June 2024.)

CCW has scrutinised all the water companies’ business plans for 2025-30 that they published in October 2023.

The legal requirements of the Water Industry National Environment Programme (WINEP) are a huge part of the costs in all companies’ business plans. £11 billion of the overall £96 billion proposed total expenditure across all plans is earmarked for dealing with storm overflow spills.

CCW is concerned that the targets for storm overflows, combined with the short timescale (five years is not a long time in infrastructure), is encouraging companies to adopt hard-engineered solutions (concrete tanks) rather than nature-based solutions such as reed beds, wetlands or sustainable drainage solutions. As detailed in our answer to the previous question, customers understand the benefits of using nature instead of man-made materials to improve river water quality and reduce the risk of flooding.

At first glance, people could assume the size of the WINEP programme in PR24 is evidence that in the past, Ofwat has not facilitated adequate investment and that the water industry is “playing catch-up”.

However, the Environment Act 2021 made storm overflow reduction a requirement – which it hadn’t been in the past.

As required by UK government, 100% of storm overflows in England are now fitted with monitoring devices. In 2010, this was just 7%. So the public is now fully aware of the situation, which previously they didn’t know about. This has also driven government action.

CCW has seen several strategic water resources schemes progress well since Ofwat established the Regulators’ Alliance for Progressing Infrastructure Development (RAPID) at the last price review. This will help address water security.

However, for the UK to have water security in an era of population growth and climate change, water companies must also reduce leaks and help consumers reduce their water use. The UK population will have to use significantly less water than we currently do. CCW continues to work with the industry to reduce demand as an essential pillar in meeting the Plan for Water’s 2050 110 litre-per-day usage target for England, through our ‘Leading the Way’ behaviour change pilot work. To date, there has not been enough focus on customer demand side measures – as we discuss below.

Although the third round of climate change adaptation reporting shone a positive light on water companies, there is still work to do. There is the need to raise awareness about the challenges brought by climate change and the actions we can all take. Saving water and improving our understanding of the responsible use of drains and sewers can contribute significantly towards adaptation to climate change. CCW would like to see companies’ adaptation reports made mandatory in England and Wales.

Companies risk eroding customers’ trust further as some of them have dropped their publicly stated (via Water UK) Public Interest Commitment to achieve net zero carbon emissions by 2030.

The Climate Change Committee is clear in its Sixth Carbon Budget that front-loading carbon reduction reduces the cost and is the most effective way to minimise the UK’s emissions. So if all water companies met their commitment, this would be better value for customers over the long term.

The water companies in England are due to submit their next report at the end of 2024 to demonstrate how they’ve addressed climate change risks. CCW has asked to see that report and will be talking to water companies about our views.

Meeting the government Plan for Water’s 2050 110 litre-per-day usage target for England will require major behaviour change. A third of the water we need to save to secure reliable supplies for the future has got to come from us all using less water, especially at home.

Ofwat’s draft determinations for 2025-30 needs the per capita consumption (PCC) target to be ambitious enough to incentivise companies to make meaningful change in getting people to save water.

CCW is in dialogue with Ofwat about how its £100 million Water Efficiency Fund can be designed to include an umbrella body to provide overall strategy and give direction; to coordinate all the demand management activities; and evaluate them in a central evidence base so future investment can be targeted at the programmes that deliver the best results. Our ARID concept provides the basis of our feedback.

Much of the conversation about behaviour change focuses on water meters to drive the necessary water savings. CCW supports water companies’ smart metering programmes as a way to help customers keep track of their water usage. However, in our Understanding Consumer Priorities November 2023 research, smart meters came up repeatedly, both in the social listening and the structured survey. Consumers, unprompted, raised concerns about having smart meters “imposed” on them against their will, or receiving higher bills with a smart meter.

Water companies need to have a well-structured communication plan so customers understand why they are having a meter installed and what this means in practical terms for them. Customers then need tools so they can see and interact with the data from their smart meter so they can consider and, ideally, reduce their water use. The information should be easy to access and understand. As an example, Anglian Water has an app so customers can interact with the information from their smart meter. The company also has done work to understand how best to nudge customers to interact with the information. CCW believes many other companies have some way to go on this.

CCW holds significant insight on how people use and value water. This intelligence can be applied to segment and tailor approaches to water savings. For example, CCW’s Water Matters yearly tracker, due to be published on 22 May 2024, shows that:

• Over the last 10 years, the number of households with meters has gone up from 44% to 62% (although Wales has only gone from 34% to 45%).
• 30% of people say they are taking showers instead of baths.
• 23% say they are spending less time in the shower.
• 21% are using water butts in their garden.
• 28% say they’re doing these things to save money.
• 21% say they’re doing these things to help the environment.

Recent years have starkly demonstrated the urgency of the action required – England’s hottest summers ever recorded were in 2022 and 2018; and February 2020 was the wettest February on record in a series back to 1836.

It is clear that Thames Water is not financially resilient. Neither is it performing well.  Thames Water was not the only company flagged up in Ofwat’s 2022-23 Monitoring Financial Performance report. In that, the regulator addressed high levels of gearing and financial transparency. But Ofwat only has oversight and regulatory power over the operating companies. It cannot prevent owning groups from making what in hindsight may have been risky and inefficient decisions.

CCW is very clear that customers should not have to pay higher costs due to inefficient financial decisions a company made in the past.

Currently Ofwat assesses its performance in its Annual Reports & Accounts.² As Ofwat does not publish detailed KPIs, it is difficult to assess in a SMART way how effective it is at regulating the water companies. Ofwat should publish KPIs, which should be developed in consultation with UK and Welsh governments, with stakeholders, and after research with customers. We would like Ofwat to present its key information, decisions, and performance in a way that is as accessible as possible. Given that trust in the water sector is at a 13-year low, regulators must not only be transparent – they must also work hard to demonstrate how they are open to public scrutiny.

Without that, we can only look to outward signs, which currently sit starkly as financial resilience issues; the level of water supply interruptions issues, and the trends on how many complaints companies receive. We can also look wider than those issues to how well (or not) water companies are delivering their performance commitments.

CCW welcomed Defra’s announcement in February 2024 that 500 additional staff are to be made available for inspections, enforcement and stronger regulation over the next three years; and that there is to be a fourfold increase in water company inspections.

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In September 2023, CCW carried out research into water company performance transparency. We wanted to explore customer views about a potential online dashboard – a single point of access where customers could examine company performance against set targets.

• Our research shows that there is an appetite for customers to have a single point of easily accessible information about how their company is performing – people responded well to the concept of a dashboard.
• The three pillars for this are: to reassure people that companies are doing what is expected of them; to empower people to be able to use the information that is available; and guide them to the appropriate support and help.
• Consumers told us that they felt that having access to clear performance information would help improve their trust in their provider and the industry.
• Consistent expectations of any performance dashboard include demonstrating what water companies are doing to get the basics right; showing consumers what they can use the data for; and helping consumers who might need it most to manage their water and keep their bills low.
• A dashboard would give consumers a greater understanding of where their money is being spent.
• There are sustained suspicions that water companies deliberately obfuscate the data and explanations – it is important that any performance dashboard is easy to understand and use.

While this research considered a general water sector dashboard, the conclusions would equally apply to one that was focused on water quality.

Currently, sewage discharge monitoring systems can only flag up when spills are occurring. The quality of the water overflowing into the river in real time is not monitored at the moment.

CCW understands that in future, water quality upstream and downstream of certain storm overflows could be monitored. This will be hugely expensive, and storm overflows represent only 7% of the reasons rivers do not achieve good ecological status (RNAGs).

CCW believes the UK needs to get better at monitoring the overall harm caused by storm overflows and other sources of pollution on river water quality. There is an opportunity for innovation in this area to develop holistic ways of monitoring overall river water quality.

Real-time data on water quality needs to be accessible for the public as well as academics and industry experts. CCW is on the steering group for Water UK’s National Environment Hub which will soon give the public up-to-date information on the operation of all 15,000 sewage overflows in England. It will do this by bringing individual water companies’ data together into a single national picture, available to any member of the public who wants to see what is happening within the hour.

The real-world impact of a spill is not highlighted in this hub as currently planned – a very small spill into a huge, fast-flowing river is likely to be less of a problem on river water quality than a big spill into a small, slow-flowing stream.

In addition, there are other sources of river pollution than water company activity The Environment Agency’s 2020 environmental performance report on the water and sewerage companies in England pointed out that the main sources of pollution are:

• 40% from agriculture and rural land management
• 35% from the water industry
• 18% from urban and transport sources

From a consumer point of view, it would be far more beneficial to have access to overall river water quality information to inform decision making.

River bathing water dominates the headlines. But CCW’s research shows that only one in ten customers view rivers reaching bathing water standards as their top priority. While we support the expansion of designated bathing water areas, water companies could spend huge amounts on trying to tackle this issue. But outdoor water can never be 100% clean and risk-free.

The water industry must do more to educate the public, to broaden their understanding of what causes river pollution and help them interpret all the different data layers, so people can make an informed judgment whether to get in the water or not.

CCW is interested in Wessex Water’s Warleigh Weir bathing water study, which uses AI to predict water quality which wild swimmers can use to choose whether to enter the water. The water quality information is made available to the general public in an easy to access and understandable way via an app.

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