London, United Kingdom — (METERING.COM) — May 15, 2007 – Water and sewerage economic regulator Ofwat has been told that it should press the water companies in England and Wales to encourage their consumers to opt for water metering.
In its latest review of Ofwat, the House of Commons Committee of Public Accounts notes that only 28% of U.K. households have a water meter and that these metered consumers have a financial incentive to reduce consumption – with research by U.K. Water Industry Research (UKWIR) showing that metering can reduce household consumption by between 9 and 21 percent. In contrast, however, the consumers without a meter pay a fixed sum for their water supply and have no financial incentive to use water efficiently.
Suggested actions that water companies could take include promoting the benefits of metering to consumers as well as routinely installing meters when there is a change of building occupancy.
The PAC also suggests the introduction of a revenue cap, noting that an investigation on this has been initiated by Ofwat. As a water company increases its revenue for every unit of water used by a metered consumer, there is incentive for the company to encourage these consumers to use more, rather than less, water. While there is no evidence that water companies are doing this, as metering becomes more widespread the economic incentives on companies to do so will increase. Accordingly a revenue cap, as opposed to the current system of a price cap, would limit the amount of total revenue that a water company can earn and therefore reduce the incentive to promote water use.
Other findings of the PAC are that Ofwat does not understand clearly how consumers use water and has not collected enough robust evidence on which water efficiency projects are most effective in helping consumers to use less water. Ofwat needs to divert more of its attention to water efficiency and to gain a better understanding of consumers’ behavior, says the PAC.