FIFTH MEETING OF THE ESSEX & SUFFOLK WATER FORUM 7 MARCH 2013, SOUTHEND AIRPORT HOTEL, SOUTHEND FINAL

MEETING NOTES PRESENT: Independent Chair: Dame Yve Buckland For Consumer Council for Water (CCW): Steve Grebby For Consumer Council for Water (CCW): Keith Andrew For Essex Chamber of Commerce (ECC): Robert Leng For Natural England (NE): Gareth Dalglish For Drinking Water Inspectorate (DWI): Jacqueline Atkinson For Environment Agency (EA): John Orr For Essex & Suffolk Water (ESW): Heidi Mottram, John Devall, Ken Oswald, Ros Shedden, Lucy Denham, Martin Lunn (part) and Alan Brown (part) Independent Assurance Advisor: Ben Haywood Smith APOLOGIES: For Essex & Suffolk Water Corporate Responsibility Advisory Group (CRAG): Richard Powell For New Anglia Local Enterprise Partnership: Iain Dunnett For Citizens Advice Bureau (CAB): Lesley Crisp For Country Land and Business Associated (CLA): Nicola Currie For Essex & Suffolk Water: Ceri Jones For East of England Local Government Authority (EELGA): Adrian Cannard NOTES AND ACTIONS 1. Welcome and apologies Yve welcomed everyone to the Fifth meeting of the Forum. Five members, Richard Powell, Iain Dunnett, Lesley Crisp, Nicola Currie and Ceri Jones had provided their apologies. Forum membership Yve Buckland, considering the current makeup of the Forum and the loss of Adrian Cannard, asked the company to actively seek additional members to broaden the coverage of the Forum and provide fresh views. Examples could be Local Authority (especially planning), housing trusts, retail sector, agriculture, or groups such as Age Concern. Action ESW. Notes & actions of last meeting Actions from last meeting were reviewed. The record in the table at the end of these notes has been updated with progress. Completed actions are shaded these will be deleted as the minutes are prepared for the next meeting. There were eight notable points: Interaction with Anglian and Thames The company has been able to interact with Anglian and found this very useful; KO attended an Anglian event and also an Anglian representative is attending the Stakeholder Event (7 March). However, there has been no contact with Thames except for liaison on incorporating Thames Tideway into customer research; the company agreed that it would endeavour to establish contact. Action ESW. Stakeholder research the stakeholder mailshot only resulted in 5 responses from stakeholders in the E&S area; the company are planning to send the survey to all councillors in Essex and Suffolk. They have fine-tuned the questions and placed a link on the company website for schools. Forum members recognised the difficulties of stakeholder communication and recommended trying other ways, e.g. roadshows in

2.

small town centres, county shows, maybe using incentives to take part. The company should take care to cover areas of deprivation. Stakeholder Event the event will take place immediately after this meeting. The indications are that the turnout will be good (more than 30 stakeholders with many different interests). Focus groups research (leakage, environment, resilience) this research will be brought to a future meeting to be placed on a future agenda. Challenges spreadsheet recording of challenges and the companys response was seen as important given the role of the group. Draft sheet to be placed into members area; ESW to alert members; members to review and send ESW additional challenges or corrections as appropriate. Action ESW and Forum. Cost of Water Forum process this action is important and it would be appreciated if the company could try to assess and record costs that are related to the Forum only. Costs and benefits need to be captured to assess, at the end of the process, whether the Forum has delivered benefits for customers and at what cost. Also, it may be possible to compare costs across different companies. Action ESW. Interaction of Forum and Board there was a previous action for a member of the NWL Board to attend a Water Forum meeting. This action has been revised. A sub-group of Board members are about to be tasked with overseeing the PR14 process; one of these Board members will be asked to attend a future Water Forum meeting. This will give a better quality interaction with the Board. Also, the Chairs of the Essex & Suffolk and the Northumbrian Water Forums will be invited to a future Board meeting. Action ESW. Incentives Ofwat expect the company to propose incentives in its business plan, and the Forum to take part in their development and take a view on whether they are fair. BHS will be assisting the Forum through this process and the company will try and demystify the process for the Forum. YB is meeting Ofwat to discuss incentives on 11 March; BHS agreed to attend this meeting. Action BHS.

3.

Members approved the notes of the fourth meeting of the Forum. Discussion on customer research (see also presentation slides)

KO said the company have been reflecting on the feedback from Essex & Suffolk and Northumbrian Water Forums. It had carried out CBA sensitivity tests and a further review and discussed the outcome with ICS (assurance provider), which considered that this proposal was an appropriate approach. This proposal had been taken to the Management Team. KO presented the outcome of the review (see slides); the lower bound scenarios more properly represent customers views and protect those in hardship. There was a Challenge from Forum regarding whether some or all of the improvements could be delivered by efficiencies, with lower or no increase in charges; Challenge from Forum. HM said if the company had to spend extra capital or operating money to do more it would have to charge this to the customers but other factors (such as assumed efficiencies) could have the impact of reducing prices. Company response. The new approach was referred to as a re-calibration and was endorsed by the forum members. The approach to enhanced services would be considered again when the full picture was available. The Forum moved on to discuss the term Willingness to Pay. It is a standard methodology that Ofwat recognise. However, it may misrepresent what customers have actually communicated. They have stated their preference in terms of value and priority. There is a debate around the country and new terms are being proposed (e.g. value of service). YB proposed for the Forum to keep a watching brief. The company said if the name were to be changed, both north and south Forums would need to be in agreement. HM said the Forum should be minded to only accept a new term if it is sensible for customers. The members agreed to maintain a watching brief. 2

4.

Draft Water Resources Management Plan (see also paper in pack)

Martin Lunn (ML) presented the contents of the Draft Water Resources Management Plan (WRMP), there were four key discussion points: Water abstraction there was a discussion on water abstraction vs costs. Water sometimes cannot be used, e.g. if it is in the wrong place and will need to be pumped at high cost. Water is best captured and used locally. See document on water trading in Members Area Trading theory of practice a report on opportunities for water resource sharing in East Anglia. Water use and drought metering generally encourages customers to save water; ESW have found reductions of between 5% and 8% in surveys. However, we have found in a drought those with meters use more water; unmeasured customers do the right thing and save water whereas metered customers believe it is ok to use water as they are paying for it. Leakage - ESW plan to maintain the current level of leakage. This level will be below the Sustainable Economic Level of Leakage (SELL) when Abberton is complete. Research shows that customers support this approach. Defra has written that leakage should not be allowed to rise. BHS challenged the approach on economic grounds, as extra cost could be incurred by operating below the ELL. The discussion became highly technical and ML and BHS proposed to meet outside of the meeting. Challenge from BHS on behalf of the Forum. Universal metering ML presented that the uptake of meters in Essex and Suffolk is now at a tipping point; after 2015 there will be, for example, less people opting for meters and progress towards universal metering will slow. He emphasised that the south east is a water stressed area, resources must be protected, and because of growth there will be no headroom by about 2040. Also, ESW had made a commitment to compulsory metering to the EA when planning the Abberton Reservoir project. Therefore, ESW propose to start compulsory metering in mid 2016. Research shows that customers believe that metering is the fairest way to charge; however, they do not want meters to be compulsory. There were challenges from the Forum; compulsory metering may not be the only way to achieve universal metering; other companies have different approaches (e.g. Anglian); this is an emotive issue for customers. The Forum asked about the companys approach to working with customers; why other ways of persuading customers have apparently been ruled out. The company said they would review its metering strategy in the light of Forum challenge. YB asked for the company to state in its draft WRMP that it was looking at this further and the company agreed. Challenge from Forum. Action ESW. 5. Report to Ofwat

Ben Haywood Smith described how he has created a template and structure for the report and the Forum noted the following: Challenge from Forum - BHS and the Forum need to think how the challenge is integrated into it; e.g. should the challenge sheet be cross-referenced within the report? Look and feel - there is a need make it vibrant and relevant to Essex and Suffolk - regional flavours and factors would help; what is different about the area? BHS requested that the company and members to provide any materials that could help with this. Action ESW and Forum. Early chapter BHS is preparing a chapter on customer engagement Ofwat requirements YB said Ofwat would expect the report to describe the group, the key issues, drivers, customers views, and stakeholders views. Then, it should have role of the group and assure the quality of the engagement a description of the process and an explanation of the Forums understanding of their role. Ofwat need to be assured that the company has gone out and consulted appropriately. A section is needed on bringing drivers and research together into ESW proposals and then developing proposals for the business plan. The report should also cover efficiencies, trade offs, penalties and rewards and how this tracks into bills. Other content there will be assurance on the qualitative and quantitative research, the statutory programs, the Water Framework Directive and the rest of the National Environment Programme. There could be some discretionary content, innovation, efficiency and sustainability (short/long term). The report must cover process and assurance and how the company is 3

responding to customers views, and how this leads into balance. Also cost pace and timing, acceptability, intergenerational equity and incentives must be covered. Ofwat do not need an interim report YB reported that Ofwat have said they do not want to see any draft or interim reports. The Forum noted that this is entirely consistent with their published approach. First draft BHS agreed to first share the draft with YB and The Northumbrian Water Forum Chair, Andrea Cook.

6. Water quality (see also paper in pack) Alan Brown (AB) led the discussion on water quality and took the Forum through the paper. The Forum noted that the paper was written for the north and south regions. The following points were notable: DWI JA said that DWI has seen the companys plan and are, on the whole, supportive of it. There has been no decision on whether any elements of it will require statutory programmes. Lead AB said 20 30% of customers have some lead pipe; some is owned by the company and some by the customer; complete removal of lead from customers and company systems is prohibitively expensive; water companies use phosphate dosing to ensure that water does not dissolve lead from pipes and this results in safe water; the company is proposing to remove a limited number of lead pipes in hot spots (540) and to fine tune the treatment of the water in some areas; the young are more vulnerable to harm from lead, the company will recruit a lead liaison officer to target and work with schools and day care centres. There was Challenge from Forum to not directly addressing the number of lead pipes; customer challenge groups can help the company to be more flexible; could the company provide incentives to customers to remove their lead pipes? Some other companies are carrying out studies; E&S should consider carrying out some innovative pilot studies. Challenge from Forum, Action ESW. Discolouration AB said there is very little risk of discolouration in Essex and Suffolk areas. However, customers supported investment to reduce the risk further; the company proposes investment in additional flushing points in mains and additional flushing activity. Pesticides AB said that several water treatment works receive raw water which can contain pesticides, which cannot be removed by water treatment; there is no health issue with these pesticides; the company has given legal commitments to the DWI in the form of undertakings; the most appropriate control open to the company (without a treatment option) is catchment management; the company are currently very active in the catchment and propose to increase this activity by undertaking some pilot farm-scale catchment management trials. Their was a active debate where the Forum challenged that pollution is coming from farmers and therefore polluters should pay, also the EA should be more active on the ground and help to pay for measures; JO said there is a stewardship group working to find control methods; however the control is largely based around voluntary agreements; there is no certainty for water companies. DWI guidance says there is evidence voluntary measures are not working; if that is the case the EA and others have a statutory duty to comply with the WFD. JO said the EA are looking at this as a matter of urgency. GD said that catchment management has multiple benefits; also we must not forget that pesticides are needed to produce cheap food, if pesticides are restricted food costs may increase. Challenge from the Forum to EA and others engaged in farming practices. 7. Timeline and future meetings (see also slides in pack)

The following items were proposed for discussion at the April meeting (i.e. the Outcome Event): Focus groups research (leakage, environment, resilience) Outcomes

SUMMARY OF ACTIONS completed actions shaded, all uncompleted actions to be rolled forward Description A glossary of common terms used in the Water Industry to be provided to Forum members Complete - glossary and induction materials now in Members Area in Forum Information folder. Issue of sewerage bill increases impact on Essex & Suffolk customers; YB to consider how to press Anglian and Thames regarding better integration and communication of their approach to engagement with ESW. Interaction with Anglian now established see notes above. Requirement for interaction with Thames needed. Closed - see new action - 36 ESW to assess the time required for both governance and report writing and agree a work commitment from Ben. Underway BHS has agreed to carry out both functions for both Water Forums. The programme of work is under development. The Forum recognised that, for all concerned, understanding of the process must be iterative. Stakeholder first contact - ESW to finalise the stakeholder list and produce a draft for the warm up email for the Forum members Closed stakeholder consultation is fully underway; although it will be refined further see notes above. ESW to bring elements of the water resource management to the Forum Complete - the Water Resource Management Plan was discussed at this meeting (agenda item 4) Environmental outcomes need clarifying and bringing to table with key statutory guidance Ongoing watching brief Produce an implications paper for the Forum, to cover requirements for all aspects of water quality. Complete - a drinking water quality paper was circulated and discussed at this meeting (agenda item 6). Responsibility ESW

16

YB

17

ESW

22

ESW

24

ESW

25

ESW and environmental regulators ESW

27

28

Ensure that the following additional success criteria are included in the assurance plan: 1. Biodiversity the Abberton project was exceptional because biodiversity was integral to the planning this needs to be added to the questions. 2. Profitability some reflection is needed (fair? appropriate? sustainable?). 3. Innovation this must be assessed. 4. Majority of customers are willing to pay (80%) would be an appropriate success criteria. 5. Reputational risk this should also be taken into account and balanced against business risk. Completed additional success criteria added. The Forum must capture all of their substantive challenges and the outcomes of these. Governance and assurance to be added to the Forum actions Completed - challenges and audit trail (evidence) documented have been placed in Members Area. Forum members to review. Provide the Forum with an estimate of the cost of the report process, as well as all Forum work that is the cost over and above business as usual. This action is extended to carrying out a cost/benefit analysis also possibly benchmarking costs across other company customer challenge groups. There is a need for balance of approach in reporting across all of the challenge groups; our Forum could appear too critical, or look like th nodding dogs! YB to take this issue to the Ofwat workshop (10 December) and feed back. Complete YB gave feed back on Ofwats directions (e.g. Incentives in item 2 and Ofwat requirements in item 5. The Forum to discuss poverty and what can be done. Forum interaction with the board - Board. A member of PR14 Board sub-group to attend a future Water Forum meeting. Also, the Chairs of the Essex & Suffolk and the Northumbrian Water Forums will be invited to a future Board meeting. Financial items such as efficiency and incentives are expected to be in the plan it would be appropriate for the Forum to review and challenge these; how can the Forum get to a point where they can challenge these? BHS to assist the forum. All to determine what actions are required.

ESW

29

BHS

30

ESW Forum members ESW

31

YB

32 33

ESW ESW

34

Forum BHS ESW

35

Ben Haywood Smith is to be invited to all future Forum meetings Complete Forum membership broaden membership Establish contact with Thames Waters customer challenge group.

ESW

36 37

ESW ESW

38

Universal metering ESW to: state in Draft WRMP that it is looking further at compulsory metering; and provide the Forum with more detail on plan for compulsory metering, e.g. how it would work with its customers and why other ways of persuading customers had been ruled out. Report to Ofwat need for material to make report relevant to Essex and Suffolk areas. Forum members and company to provide material (stories, pictures, statistics...) Drinking water quality lead ESW to consider innovative pilot studies

ESW

39

Forum members ESW ESW

40 41