Water boss says supply is priority

Monday, October 20, 2008

Competition in the water industry should focus on preventing shortages rather than increasing consumer choice, says the chief executive of one of the UK’s biggest water companies.


Heavy users of water in England and Wales – such as hospitals and factories – have the right to switch supplier. But the way that access to the water network is priced has meant new entrants have been deterred from joining the industry and no switching has taken place.

The government, through the Cave Review, and Ofwat, the water regulator, are looking at ways to encourage competition, including potentially allowing households to choose who they buy water from. But Tony Wray of Severn Trent said in an interview with the Financial Times that focusing on consumer choice would be wrong. “We believe there is a place for competition but it needs to happen in a way that genuinely helps solve some of issues in the industry, not just so that customers have a choice of who retails their water.”

Mr Wray said competition should aim to solve the biggest problem facing the water industry today – “having an excess of water in the north west and a shortage in the south east”.

South-east England receives less rain than other parts of the country but also has a growing population, which is expected to lead to increasing shortages.

“This is the fundamental challenge for water in the UK. Climate change will cause a worsening imbalance between regions.”

Mr Wray said it was not necessary to build a “national grid” for water, which would be prohibitively expensive but there should be more pipelines connecting the regions and a market for trading water abstraction rights.

“By allowing trading of abstraction rights and more interconnectedness of our networks, it could allow water to move more effectively [around the country]. It would be a lot lower cost than building new reservoirs or desalination plants.”

Severn Trent’s region stretches from Wales to East Anglia and the company is already bringing water in from wetter western regions and exporting water to the drier east. However, Mr Wray said water networks in England and Wales were very localised and more connections should be built.

Competition should also be structured in a way that freed up access to privately owned boreholes, said Mr Wray. “Only about 50 per cent of the impounded water in the UK is in the ownership of water companies. You need to have a freer and more competitive way of accessing these resources.”

The other 50 per cent is in the hands of councils, private companies, and landowners, a legacy of the water industry’s fragmented past. “There’s a huge unexploited resource out there,” Mr Wray said.

This story was featured on the Financial Times website

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