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THE MAGAZINE FOR THE DRAINAGE, WATER & WASTEWATER INDUSTRIES


covered by AMP 7 only eight have single digit reductions planned. Over the reminder two almost make the cut with 10% reductions planned. But the remainder have bill reduction targets ranging from 13% up to 26%. This has to raise some questions.


Ignoring the lower end reductions which might be explained away by efficiency savings and better working practices, to cope with a price reduction on water bills of up to in excess of a quarter (26% is the highest) must take some doing, if not explaining. Is it that the last Price Review leading to AMP 6 over-estimated the income requirement for these water companies? Is it that water companies themselves got away with asking too much when they put in the pricing request last time around, so have been effectively over-charging their customer base for the past five years with regulator consent? Is it that the proposed/expected workload for the coming AMP is so much reduced in these areas that the regulator does not see the need for incomes to remain as high as they have been and so has adjusted its calculations accordingly?


Is it that profit margins for the previous AMP far out-stripped what was expected and therefore the regulator is trying to rebalance the owner/customer balance of operating such a company, all of which effectively have a captive customer base with no chance of reducing bill through competition for customers.


If the reasoning behind these price reduction calls is in the documentation, it may be that it was somewhere in the section where this author’s concentration lapsed but if it is there I did not find it in any obvious format. If someone knows please tell me!


One of the most interesting, and publically speaking, most important targets is the aim to reduce current leakage levels across the country by an average 16%. According to information currently available, at present around 3,170 million litres per day (21%) is lost through leakage, yes that is over one fifth of the +15,000 million litres per day of the water collected, stored, treated and put into public supply. This is targeted to drop by 16%, or some 500 million litres per day. This however will still mean that


some 18% of the treated water placed into the system each day will be lost via leaks or still around 2,670 million litres per day or to put it another way a saving of just another 3% of the total amount of water to be passed into the public supply system.


Whilst the absolute numbers appear to be considerable, the fact that the saving only reflects a very small percentage of the total water supply may indicate one of two things. Either the effectiveness of leakage reduction is limited by other factors such as pipe networks that continue to age and so produce new leaks almost as fast as the old ones can be removed, repaired or replaced or is it that to change the balance of the leakage versus repair/replacement efforts the level of resources that is currently targeted at this problem is simply not enough in terms of man-power, equipment and cash. Either way, any changes that are necessary are likely to impact significantly on the bottom line of any water company and therefore likely impact share prices and investor confidence. Is this a battle


FOLLOW US


June 2020 | drain TRADER 9


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