Every Drop Counts Incentives for Greater Water Efficiency

1. Every Drop Counts Incentives for Greater Water Efficiency Every Drop Counts – Achieving Greater Water Efficiency Report PreviewLouise Every 7 September 2006

2. Outline • Project purpose • Benefits and opportunities • Policy challenges • Key findings • Current action on water efficiency • Key recommendations • Progressing metering • Water efficiency targets

3. Project purpose • Builds on ippr’s Commission on Sustainable Development in the South East • Develop policy recommendations for improving water • efficiency in homes • Two main areas – • Options for increasing water metering • Feasibility of introducing water efficiency targets

4. Benefits and opportunities Improving domestic water efficiency could… • Contribute to a secure, sustainable water future • Contribute to tackling water affordability • Small, but not insignificant reduction in energy use and related carbon emissions • Potential for water efficiency • Estimates for potential water use reduction in average existing home range between 12 – 30 %

5. Water resource issues variable across UK People’s relationship with water is complex Public mistrust of company motives in promoting water conservation Minority of households metered Low take up of water efficiency technologies Water regulatory system currently rewards supply expansion Evidence base on cost-effectiveness of demand management not as robust as supply-side measures Economic case often difficult, and poorly made by companies Challenges

6. Key findings: current activity • Water – collective responsibility to use wisely • Water companies, public bodies and Government have duties relating to water conservation (Water Act 2003) • Government • Water Saving Group • Improving homes - water fittings &/or building regulations, CSH • Encouraging behaviour change – possible product labelling • Public bodies – water strategies, water efficiency promotion, no EST equivalent to help co-ordinate advice and funding • Water companies – all companies do some activity, but overall decline in activity since 1997, with some exceptions…

7. Declining performance on water efficiency

8. Average annual expenditure on water efficiency and supply pipe leakage activities per person (2002-05) Supply pipe leakage • England and Wales: 40.4p • Greater South East: 40.8p Water efficiency • England and Wales: 10.5p • Greater South East: 11.5p

9. Average annual water savings from water efficiency and supply pipe leakage activities per person (2002-05) Supply pipe leakage • England and Wales: 670 ml/day • Greater South East: 806 ml/day Water efficiency • England and Wales: 327 ml/day • Greater South East: 250 ml/day

10. Key findings… Clear guidance needed from Ofwat on what is or is not reported as ‘water efficiency’ activity Duty not ensuring that companies in water stressed areas are delivering more water savings at the household level If Duty is to be a driver for more water efficient homes, Government may need to rethink its interpretation by Ofwat and water companies Caveats… Data on water savings not robust Data does not include metering or mains leakage activity Direct water savings not always primary aim Water efficiency may not be most cost-effective means of meeting supply-demand balance Water company activity

11. Progressing metering 28% of customers in England and Wales are metered Metering fairer way of paying for water use – based on water consumption. Metering can enable water savings of 10%-15% per household. Households have a legally protected right to choose whether they are charged for water according to a meter. But Secretary of State can accept applications for ‘Water Scarcity Status’ which enables compulsory metering

12. Metering recommendations • Accelerate compulsory metering in water stressed areas • Take forward proposals of Water Saving Group (WSG) to: • Streamline water scarcity status application process • Integrate metering proposals into Water Resource Management Plans • Identify water stressed areas • Urgent need to evaluate and communicate benefits of smart meters and multi-utility smart metering

13. Safeguards for supporting poorer households and vulnerable groups • Government to develop a water affordability benchmark – could build on former sustainability indicator (no more than 3 % of household income to be spent on water bills) • Development of innovative social tariffs (with more widespread metering) • In interim, two options: • Expand Vulnerable Groups Scheme • Government funded ‘water affordability’ grant scheme similar to ‘Warm Front’. Grants to qualifying, metered households to improve water efficiency of their homes

14. Water efficiency targets • Leakage targets work, no targets for other areas of water use • Current interest in water savings targets from WSG & others: • per capita consumption • water-into-supply • Both assessed on basis of reduction in demand • Lessons water sector can learn from energy sector • Potential for water equivalent to Energy Efficiency Commitment (EEC)

15. Energy Efficiency Commitment • Key policy on existing homes • Obligation on suppliers to deliver ‘energy benefits’ in domestic households • Do not have to reduce consumption (but may in future) • Carbon savings, market transformation, targets met …not perfect… …not directly transferable to water… …but aspects can be applied to a water sector equivalent

16. Targets - key differences and recommendations • PCC or Water-into-Supply target: target on companies to deliver net water savings (i.e. lead to a reduction in demand) • - Recommend Government set voluntary pcc benchmark as a measure of good practice sustainable water consumption • Water Efficiency Commitment: target on companies to deliver gross water savings (i.e. companies deliver water savings but are not held responsible if demand does not decrease) • Recommend Government set national minimum water efficiency targets with enhanced targets for water stressed areas • Applied to water company areas • Initially voluntary, but aim towards statutory status by 2014-15

17. How would a WEC work? - 1 • Government sets pcc benchmark and national minimum and enhanced w.e. targets • Obligation on companies to meet proportion of savings in priority group (low income and vulnerable h’holds) • Ofwat administer and EA monitor impact on consumption • Aligned with and funded through periodic review process • Only measures with acceptable level of confidence in water savings would qualify, but incentives for innovation • Water savings to be due to company effort – companies encouraged/expected to work with third parties

18. How would a WEC work? - 2 • Freedom to meet target however companies choose • EST’s role expanded to include water • Guidance on Water Act 2003 (due 2006) to include: • Requirement to meet targets (when statutory) • Encouragement on educational and informational activities • Encouragement on R & D • Public bodies given guidance on roles and responsibilities in relation to WEC

19. Key messages to consumers • Need to respond to challenges facing water resources • Managing consumer demand will be important element • People, businesses and Government must all do their bit For consumers… • Metering will provide information on water use and a price incentive to influence water-using behaviour • A Water Efficiency Commitment will ensure companies provide incentives to customers to improve domestic water efficiency – i.e. pay for water used not wasted • Help for those on low incomes or are vulnerable through targeting of WEC measures, Government funded grants and development of social tariffs