Essential investment for the future: Thames Water outlines £6.5 billion plan for water and sewerage services

Sep 11, 2008

Thames Water has published proposals for its largest ever investment programme while still keeping customers’ bills below the industry average for the next five years.

The plan, which has been submitted to the independent water regulator Ofwat for examination, outlines the essential services the company intends to provide, and investment necessary, for the next five-year period from 2010-2015. It has been drawn up after Thames Water’s most comprehensive public consultation and reflects customers’ concerns and priorities.

The proposed cost of £6.5 billion will be the largest ever programme of investment undertaken by a UK water company, however by 2015, on average, customers will still be paying less than £1 a day for all their water and waste water needs.

David Owens, Thames Water’s Chief Executive Officer, said:
“We’re committed to providing the best-in-class water and sewerage services for our customers at prices they can afford. In drawing together these plans we’ve undertaken the most extensive public consultation in our history. Our customers have told us what they want our priorities to be, and what they would be willing to pay for. What we have produced reflects these views.

“Thames’ customers have enjoyed the lowest bills in the industry for many years, but we now need to make essential investment to secure their services for the future. This is particularly true for London, where the water and sewerage infrastructure is ageing. There will be an inevitable impact on bills, but even so, we will be able to keep them below the industry average.

“The plan focuses on maintaining and improving the service we provide to our customers; it will help guarantee their supplies for the future, and ensure that we are able to cope with future challenges - not only population growth and climate change, but tighter environmental and legislative requirements. Above all, we recognise that it must be affordable. Ultimately it will be up to the independent regulator, Ofwat, to decide the price we are allowed to charge to provide these services.

“By targeting investment where it’s needed most and where our customers want, we have been able to propose a programme which should keep price rises at a reasonable level. The average bill is expected to rise by around 3% over inflation each year, so in five years’ time customers will still only be paying around a £1 a day for all their water and waste water services, representing excellent value for money”.

The plan is built around four main objectives, based on the company’s discussions with customers and other stakeholders:

“Secure service levels”

Surveys said: Customers expect current levels of service to be maintained, however, this is in the face of an increase in demand and ageing infrastructure. The population in the Thames Water region is expected to swell by more than 380,000 in the next five years, and investment will be needed to ensure demand does not outstrip supply and infrastructure is able to cope. In addition the age of much of the infrastructure, particularly in London where around half the water mains are over 100 years old, means more investment will be needed for maintenance and replacement.
How the plan delivers: Thames Water will therefore invest heavily in keeping its existing assets, such as the major water mains and sewers, in good condition. In addition, the company proposes to start building a new reservoir in Oxfordshire, which will be essential to help us secure water supplies for the future, and which will provide up to 10% of the region’s water when completed in 2021.

“Be responsive”

Surveys said: Customers expect Thames Water to respond to the issues that cause them greatest concern. Our research revealed that the issues of sewer flooding, odour from sewage treatment works and levels of customer service were priorities.
How the plan delivers: The plan allows for an increase in investment on tackling sewer flooding, to reduce those properties at risk of flooding with sewage by nearly a quarter. Programmes to reduce odour will are planned at sewage treatment works around the region, and customer service performance will be transformed with the goal of halving the level of complaints.

“Act sustainably”

Surveys said: The impact people have on the environment was identified as a major issue of concern to customers polled. Dealing with climate change, reducing our carbon footprint and encouraging more efficient use of water were identified as areas we should address.
How the plan delivers: Thames Water take environmental responsibilities very seriously and their plan reflects this. Over the next five-year period they aim to reduce carbon emissions by 20%, and reduce leakage from our pipes by 18%. In addition, they’ll be installing a million water meters, to raise the total number of metered households to 54%, compared to 25% today. They will be improving the quality of the River Thames and the lower River Lee by building the Lee Tunnel and improving Beckton sewage treatment works, which will dramatically reduce the volume of sewage overflows entering the river. In addition, they’ll be improving the quality of around 250km of other rivers in the region.

“Ensure value for money”

Surveys said: While average bills for Thames Water customers have always been among the lowest in the UK, customers were concerned that they should continue to be affordable, given the levels of investment planned. There was also concern that vulnerable customers should be protected as far as possible from the impacts of price increases, and their needs addressed as part of any wider programme of metering.
How the plan delivers: Thames Water will continue to drive down its running costs and spend customers’ money efficiently; social tariffs will be developed to help customers in most need, with a range of different tariffs trialled, aimed at promoting water efficiency and reducing bill impacts; in addition a new charitable trust will deliver direct assistance to people in real difficulty.

The average household combined bill (excluding inflation) for each year to 2014/15 is expected to be as follows:

Year 1 - 2010/11 - £303
Year 2 - 2011/12 - £313
Year 3 - 2012/13 - £325
Year 4 - 2013/14 - £326
Year 5 - 2014/15 - £329

David Owens said:
“This is an essential programme of investment which will deliver the services our customers expect. I am confident, from the discussions we have had with them, that we have put their needs at the heart of our plans. This week we will be launching the final stage of this dialogue with a 12-week online consultation. I encourage everyone to get involved, as their comments will be fed into the final plan Ofwat will use to determine the price limits for the next five years and help us ensure we can provide water and protect the environment for the future”.

Headlines from the five-year plan:
  • £6.5billion - total proposed cost of programme
  • 90p - average daily proposed total cost per customer for water and sewerage services by 2015 (excluding inflation)
  • 380,000 - predicted population growth in Thames Water region by 2015
  • 780,000 – amount of extra people we will be able to cope with after expanding the capacity of our sewage treatment works
  • 2,500km – of ageing, leaky water mains to be replaced by 2015
  • 120 million litres – daily reduction in leakage from our pipes by 2015 - enough to supply more than 750,000 people
  • 18% - amount we intend to reduce leakage by 2015
  • 1 million - water meters to be installed, increasing household penetration to 54%
  • 45 million litres – predicted reduction in water we’ll be able to supply by 2015 due to climate change
  • 20 million litres - amount of water we aim to save each day, by 2015 by promoting the wise use of water, enough to supply over 125,000 people.
  • 4,700 homes - to be protected from risk of sewer flooding (one-in-30 year storms)
  • 20% - reduction in carbon emissions by 2015 (compared to 1990 levels)
  • £1.3billion – to build the Lee Tunnel phase of the Tideway Tunnel programme and improve Beckton sewage treatment works
  • 250km – of rivers to be improved.

Thames Water
Sue Cantwell, Public Consultations Manager

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