How water companies operate - environmental responsibilities

I was recently asked to present on how water companies operate in terms of their environmental responsibilities (in England). A complex regulatory environment exists in relation to environmental management and water companies. This blog post provides a high level overview on managing responsibilities in relation to planning, monitoring and reporting and future challenges faced by water companies.

Planning

There are many challenges for sustainable water management. The figure below from Anglian Water provides a useful summary. There are increasing challenges from Ofwat in terms of markets and innovation that are pushing for efficiencies and resilience (though there is tension between these two elements in the draft determinations for PR19).

We face a very complicated regulatory landscape in the water sector (see figure below). This has driven investment to improve environmental and public health outcomes and regulations have more recently evolved to support this through outcome based approaches, TOTEX and greater voluntary reporting. This complex regulatory landscape for the environment includes the Environment Agency, Natural England, Ofwat, Defra, DWI, CCWater, the Committee on Climate Change and the National Infrastructure Commission. Tensions arise in meeting the objectives of all stakeholders as they aren't always aligned or being delivered on the same timescale.

Resilience planning is an increasing requirement linked to environmental responsibilities. This is wider than climate change impacts on long term water resources and quality as we increasingly need to account for heatwaves and peak demand as well as freeze/thaw events (both seen in 2018). Managing flood risk impacts on infrastructure, IT and networks as well as potential issues from Brexit also need to be considered for resilience.

The Government's 25 Year Environment Plan sets out a range of actions that impact on water company environmental responsibilities. Actions on Environmental Net Gain and requiring developers to consider the needs of the environment in terms of water for new properties will also impact on water management, in addition to requirements to demonstrate improvements to natural capital by water companies.

The three elements that inform the environmental responsibilities that need to be met by water company plans are outlined below (EA 2017).

WISER - Water Industry Strategic Environmental Requirements

The WISER document provides details across a range of environmental areas (see image below), including the Water Framework Directive, bathing waters, biodiversity, urban wastewater, invasive species, chemicals, resilience and compliance with Environmental Permitting Regulations. For each the document sets out legislation and duties, expectations, and good practice approaches.

WINEP - Water Industry National Environment Programme

The Water Industry National Environment Programme (WINEP) 3 sets out the actions needed by water companies to meet their environmental obligations. The number of obligations by water company is set out below. I'll use Anglian Water as an example as they have the highest number of obligations, driven by topography of the region, with intensive agriculture and slow moving rivers. Through their digital engagement programme, Anglian Water found that 74% of customers voted for high investment in protecting the environment. The Ofwat draft PR19 determination sets out £729m for Anglian Water to deliver this programme, however this is after pushing through many efficiencies in the process, which may be hard to implement.

Government strategy

The Government’s 25 Year Env Plan pushes the need to consider natural capital approaches and net environmental gain. These will be pushed forward in the forthcoming Environment Bill. Water companies have been looking into natural capital approaches for some time (Anglian Water example below). This includes moving beyond natural capital accounting to actively using it and the concept of net gain within planning. Concepts such as the Urban Greening Factor (now applied across London but also Southampton) might be useful for LDPs in other regions to help drive green infrastructure and manage water quality and sewer capacity issues. This area is evolving quickly with developments such as Natural England’s Biodiversity Metric (linked to Biodiversity Net Gain) and tools such as BEST from CIRIA (new version being released that accounts for the 6 capitals).

Water recycling long term plan and Drainage and Wastewater Management Plans

Anglian Water released a Long Term Water Recycling Plan in February 2019. This sets out their approach to strategically planning for wastewater capacity but also delivering against environmental obligations. Water UK's 21st Century Drainage Project has led to the development of guidance for Drainage and Wastewater Management Plans. These are being taken forward to meet requirements for the 2024 Periodic Review. As I outlined in my previous blog post, there are many changes occurring in water resources planning and it makes sense to join up with DWMPs to take an integrated water management approach to better enable resilience.

PR19 Performance Commitments

In additional to the regulatory and planning approaches to water companies delivering their environmental responsibilities, Ofwat will also be monitoring and incentivising these through performance commitments. Examples of these are provided below for Anglian Water and include commitments in common with other companies (C) and bespoke (B).

Monitoring and reporting

Environmental Performance Assessment

As set out in the WISER document, a key monitoring and reporting mechanism is the Environment Agency's Environmental Performance Assessment. The most recent assessment is below and this found many issues in 2018 and that they are continuing into 2019, which may lead to tougher regulatory approaches. Recent large fines handed down to Southern Water, Thames Water and others may also impact on the regulatory approach being applied (this could impact voluntary monitoring and reporting against EPR).

Annual reporting against the business plan

Water companies are required to report annually against their business plan, which includes performance commitments linked to the environment (example from Anglian Water below). Elements of this are included in company environmental and sustainability reports as well as dashboards that may be updated more frequently. In the future water companies will also report against their public interest commitment - this element of the hydro-social contract in Australia has led to more integrated water management.

The future

Research and innovation

There is a clear need for greater innovation and research to meet the environmental responsibilities of the water sector. Ofwat are consulting on proposals that could allow the sector to raise up to £200m and on new structures to support greater collaboration.

The UKWIR Big Questions include wastewater collection and recycling as ways to driver environmental improvements. This builds on the work that Water UK has been leading to support collaboration on 21st Century Drainage and moving to DWMPs.

At an individual water company level, several companies have been pushing forward their own innovation platforms. Anglian Water has been promoting their Innovation Shop Window in Newmarket. The aims of the shop window are below and include zero pollution and flooding and becoming carbon neutral.

Catchment based approaches

The Catchment Based Approach will increasingly lead to more efficient approaches to dealing with diffuse pollution issues. This includes water companies working with rivers trusts and other local organisations. Rather then relying on end-of-pipe engineering based solutions this approach can be more cost effective and deliver wider benefits through community engagement. A catchment based approach will also be key delivering natural capital approaches. The figure below highlights the benefits of this approach in 2017/18.

Transitions for resilience

There is also a need for a wider transition towards resilience that will also help meet environmental responsibilities of the water sector. This transition approach was mapped for the UK in a 2013 report by CIRIA (image below). Although we know this isn't always a linear transition across all elements of water management this approach can help visualise the line of sight towards a water cycle city and water sensitive city for the UK.

Based on the experience in Australia, there are also a range of transition factors and those identified for the UK in the 2013 CIRIA report (many are still yet to be delivered) include:

• Presence of a co-ordinating body - the question remains around "who is responsible" for many aspects of water management within fragmented regulatory and operational elements of the water sector in the UK.
• Evidence base, guidance and training - some provided at a national level by SuSDrain or local levels such as in London.
• Presence of Water Sensitive Urban Design champions - SuSDrain is aiming to drive SuDS champions, however we need champions for wider elements of integrated water management also.
• Supportive planning and design process and legislation - this is complicated by elements of the Flood and Water Management Act 2010 not having been enacted.
• Reliable science and research - this area is a focus for many universities however Ofwat's proposed approach to research and innovation or greater focus on academic and industry partnerships through Innovate UK may help this to influence policy and practice.
• Fostering environmental expectations - with climate and ecological emergencies being declared and pressure on government in relation to the 25 Year Environment Plan, there is an opportunity for this transition to get greater political support.
• Strategic funding and incentives - DWMPs may enable a more strategic funding approach with partners. This could link up with innovations such as the Greater Manchester Combined Authority's Natural Capital Investment Plan.

Conclusions

Overall water companies operate within a complicated regulatory regime to deliver environmental obligations. There is a need to balance costs, risk, customer and regulatory expectations. Monitoring and reporting are key and potential changes to EA regulation may arise due to recent poor performance. In the future this will be supported by DWMPs, building on catchment-based approaches and transitioning to integrated water management.

Join the conversation at the IWA World Water Congress 2020 in Copenhagen

The call for papers and workshop proposals is open until 30 October 2019. Theme 6 is calling for papers on water resources and large scale water management, including delivering against environmental responsibilities relating to:

Groundwater

• Groundwater mapping, monitoring and modelling
• Protection of groundwater quality and quantity
• Soil contamination and groundwater remediation
• Governance, management and institutional arrangements

Surface Water

• Surface water monitoring systems and models
• Protection of surface water quality and quantity
• Source-to-sea pollution management
• Pollution from point sources – agriculture, industry, urban
• Diffuse pollution – sources and mitigation
• Water-related ecosystems and environmental flows

Integrated Water Resources Management

• Water stress, droughts and floods, including impact of climate change
• Catchment management and ecosystem services on different scales
• Large-scale nature-based solutions and biodiversity
• Water rights, trading and partnerships

Holistic Assessments

• Life cycle assessment, water efficiency, water footprint, virtual water, etc.
• Planetary boundaries and science of sustainability
• Water resource management towards Sustainable Development Goals (SDGs)

Find out more at: https://worldwatercongress.org/