As the UK struggles to cope with the ongoing heatwave and farmers are due to meet with Government officials for a “drought summit”, Environment Secretary Michael Gove is planning to challenge the Chief Executives of the water companies over their failure to meet leakage targets.

 The water company chiefs can now expect to be summoned by the Environment Secretary to a meeting at Defra – Michael Gove said:

“Next week I will ask the chief executives of the water companies that have failed to meet their leakage targets to a meeting at Defra to discuss how they are going to address this serious issue and improve their performance.”

He added that customers expected a “reliable and resilient water supply” and the utilities had “much more to do to tackle leakage”, commenting:

“That is why I have repeatedly made clear that companies must improve and recently wrote to them to outline my expectations during this period of dry weather.”

In June this year Thames Water agreed to pay £65 million back to customers as part of a package of payments and penalties worth £120M following an Ofwat investigation which found that Thames Water’s Board did not have sufficient oversight and control of the company’s leakage performance.

The £65 million payment was on on top of £55 million in automatic penalties incurred by the company for missing the commitment it made to customers to cut leaks. Thames missed its targets in 2016-17 and 2017-18 - its own current forecasts suggest that it will also not meet its leakage target for 2018-19.

A report released by the Consumer Council for Water (CCWater) water watchdog In December showed the water industry in England and Wales as a whole lost 3.1 billion litres of water every day in 2016/17, with overall leakage levels increasing by just over 1 per cent. CCwater believes the targets could be stricter and the water companies could do more to address leakage. With leakage increasing and the majority of companies meeting their leakage targets, the watchdog said it is continuing to question whether targets have been set challenging enough within the sector.

Currently, water industry regulator Ofwat requires companies to “fix leaks as long as the cost of doing so is less than the cost of not fixing the leak.”

The cost of fixing a leak includes environmental damage and the cost of developing new water resources to compensate for the water lost through leaks. This approach - known as the sustainable economic level of leakage (SELL)- allows for leakage to increase when new resources are built because the value of reducing leakage decreases as more water is available.

Government knew as far back as 2012 current leakage approach wasn't delivering

However, as far back as 2012, ahead of the previous Price Review in 2014, a review of the sustainable economic level of leakage conducted for the Environment Agency, Ofwat and Defra concluded that the SELL approach tended to maintain the status quo and did not incentivise efficiency or innovation.

It also found that the companies were risk averse and that "due to companies’ risk averse nature in relation to water resource planning, they were reluctant to plan for lower levels of leakage for the long-term, resulting in inertia in relation to reducing leakage.”

Ofwat has now set all the water companies a target of bringing down leakage by at least another 15% up to 2025 and expects to see further reductions beyond this date.

Click here to see the latest available leakage figures by individual companies for 2017/18