London, U.K. — (METERING.COM) — January 13, 2009 – In its response to a review on water charging and metering in the U.K., the water industry body Water UK has urged the Review to recognize that tariff policies for different water companies must reflect differences in customers, population, climate, physical environment and availability of water in the environment.
In its submission to the independent Walker Review of charging and metering set up last year by the U.K. government, Water UK says that the water companies’ activities are closely linked to the physical environment in which they operate. Their charging systems, inevitably, reflects the specific situation – economic and social as well as physical – in which each operates. Their views on charging therefore differ and there is not a single correct view on charging across England and Wales, let alone the U.K.
Water UK says it believes that many customers define a fair charging system as one in which they are charged according to the demands they put on the system. As such water bills should be – and should be recognized as such by customers – a payment for a service received.
However, distinct from this is the issue of affordability, which is primarily an income distribution issue and a concern of society in general, not one specific to the water industry and its charging system. Affordability has a specific impact on the water industry – and could impair its ability to respond to the government’s challenges and finance its activities – through its impact on debt and on the ability of water companies to collect the revenue owed to them generally.
The current charging system already includes a significant element of cross-subsidy between those who pay their water bills and those who do not. However, while some of the cross-subsidies between paying and non-paying customers reflect a transfer to low income customers from other ones, it appears that this transfer is haphazard and may take place at the expense of customers who have the “commitment to pay” but who, otherwise, would be more deserving of help than some who obtain it under some form of administered cross-subsidy. In order to address this government should ensure the smooth and effective transfer of up-to-date personal information when it can help water companies target help where it is genuinely needed.
Moreover, in view of the special situation of water services, government should enact legislation to give water companies tools that can help them collect unpaid water charges from the customers who could pay them but choose not to pay because the current system allows them to escape their responsibilities.
Turning to water metering Water UK says that metering is a core issue that a charging system should address. However, the limitations of metering need to be recognized. Metering has a cost that must be justified by the value of the water it saves and many of the water industry costs are not related to the volume of water supplied to customers. A cost-reflective tariff, therefore, contains little financial incentive to save water. Moreover, financial incentives to save water, whether cost-reflective or magnified, have limited impact. Customer education and engagement are essential if metering is to point the way to a truly sustainable charging system and the objectives of the government’s water strategy are to be met.
“All stakeholders are committed to the government’s water strategy, but to get it working in every part of England and Wales we need policies that respect diversity,” said Water UK chief executive Pamela Taylor, commenting on the submission. “In water charging and metering policy, one size will definitely not fit all.”