Ofwat has today published the supporting document it has been asked to prepare by Defra as leader of the water sector group to evaluate the implications of the EU Water Framework Directive (WFD) for the water industry in England and Wales.

The paper is based on information provided by the water and wastewater companies who were asked to provide both financial and non-financial information. Companies were asked to approach the exercise on a process basis; what reductions in concentrations in effluents discharged and loads discharged could be achieved if they fitted specific processes to the current assets. For example, what consents could be met, and what load reduction could be expected. For each, companies were asked to estimate how much would it cost and, where appropriate, how much additional CO2 would be emitted from extra energy use and other sources).

The document sets out in some considerable detail the potential costs of removing phosphorus, nitrogen, ammonia and BOD at sewage treatment works and the relevant technical processes, together with  pressure on water resources. While the paper is still a work in progress, it nevertheless draws some interesting conclusions, emphasizing that there should be a balance between environmental improvement and customers bills with the comment that “ The potential bill increases that we have included in the cost summaries underline how important it is that abortive investment is avoided by ensuring that any potential obligation is supported by robust environmental need.” Among the principles it sets out for implementation of the WFD are the need to adopt a realistic approach to the environmental objectives and pace of delivery, to ensure all the improvements identified offer value for money – ie they are worth doing in their own right and to spread the burden in a fair and proportionate way across all sectors – in line with the ‘polluter pays principle’.

The Group believes that cross sector analysis will enable the application of ‘polluter pays principle’ which it considers to be key requirements of the WFD and will ensure that water customers are not paying for the problems caused by other polluters. The Group comments, “It is our strongly held view that there should not be pre-emptive or unjustified investment which would cause an undue burden on customers bills and as such support the view that rigorous environmental assessments prior to investment proposals are required."

The document acknowledges that the WFD Programme of Measures (December 2009) will be too late to incorporate within the water companies' PR09 Final Business Plan submission (March 2009) but recommends that AMP5 obligations are based upon those improvements to industry assets with obvious and well understood cause and effect.

The Group also believes that there should be development work in AMP5 to drive both understanding and improvements in technology to minimise the industry’s carbon footprint, stating that it is important to note the potential carbon dioxide equivalent emissions resulting from the additional power consumption and sludge production that the potential water industry investments could drive. According to the paper,

“One of the Water and Sewage Companies believes that at the higher end of the range of potential increases to power consumption it could see a four-fold increase in its current annual power consumption due to the energy intensive nature of technology required for reduction of organic substances. And even if the impact were to be restricted to the two Environment Agency key priorities of phosphorus reduction and ammonia reduction, there would still be a significant carbon dioxide impact. The potential obligations arising from the WFD could therefore conflict with the need to reduce carbon and the impact upon climate change.”

These are key issues for technology suppliers in the water and wastewater sector, with water companies expecting  to continue to improve their estimates and understanding of both power consumption and total carbon footprint towards PR09 and throughout AMP5.