London, U.K. — (METERING.COM) — July 1, 2009 – Charging by use of water is the fairest method of charging and the basis of water charges in the United Kingdom should move towards volume consumed, the independent Walker review of charging for household water and sewerage services has recommended.
However, the drawback to volumetric charging is that it imposes additional costs as a result of metering and cannot discriminate between households on the basis of income. So it cannot address issues of affordability for low income customers and these will require alternative approaches.
In its interim report the Walker review team says that water supply and demand present real challenges and issues for the future. While pressures are greatest in the south and southeast of England, where relative lack of rainfall is combined with high population density and anticipated population growth, there are considerable pressures on individual water resources throughout England and Wales.
Water is currently not expensive for most customers, but it is clear that over time the total cost of the water and sewerage systems will keep on rising. However, there are real issues involved in making sure that the sector operates as efficiently as possible so that costs to the consumer are kept down and the industry can meet the significant challenges it faces.
The review team says that charging on the basis of metered supplies should be the long term aim, enabling customers to pay on the basis of the amount of water they use. In particular it believes that compulsory metering is justified for high discretionary water users, where the true value of water is high, and where levels of metering are already high.
As such it is recommended that the water regulator Ofwat is asked to lead the delivery of metering in a proactive way. Moreover, given the incremental cost of adding water meters to the smart energy communications system, Ofwat should set up a smart meter group to determine the costs and benefits of smart meters to inform any decisions on approach and potential rollout of smart meters.
However, for those customers who can’t be metered, assessed tariffs should be used which provide as good a proxy for use as possible without being open to deception.
On tariffs the review team recommends that that the unit price of water should be no less than the true value of water. Based on fairness principles water prices also should continue to be regionally based and geographically averaged.
However, water must continue to be affordable. Two specific issues around affordability that go beyond general poverty are low income customers who have very high non-discretionary use as a result of medical conditions or household composition, or who live in areas of very high costs and so have very high bills compared to the national average. A package of measures will be needed to ensure water is affordable for all and a possibility is that affordability measures should be paid for nationally by all water customers.
Water debt is also on the rise and prepayment meters may enable customers to manage debt, while there is the possibility of introducing trickle valves to reduce supply to persistent “won’t pay” customers.
The review team also notes that water efficiency has an important role to play in managing demand in the face of growing pressures on water supply from population growth and the likely effects of climate change. Also there should be a national education to influence public behavior on water use.
“Although the current charging system still works, it needs updating if it is to meet the future significant challenges facing us on water,” commented the review leader, Anna Walker. “Climate change and population growth mean we will face increasing pressures on how much water is available for us all and the environment.”
The review was set up to examine the current system of charging households for water and sewerage services in England and Wales, and to make recommendations on any action that should be taken to ensure that a sustainable and fair system of charging is in place.
The interim report is now open to comment. A final report with recommendations to the government will be submitted later in the year.