The most extreme examples of deprivation and impact on livelihoods are, of course, suffered in nations where reliable, resilient and safe supplies are not widely available. But this is not just a developing world problem.
Are we leaving people behind?
In England and Wales, despite being a developed nation, we are at risk of leaving people behind. Water bills continue to rise – thanks to the costs of updating our aged infrastructure, while improving water quality and environmental health. Moreover, population growth, climate change and our short term-biased view of the costs of treating contaminated water all mean that demand for clean water is starting to exceed current supply. Investment will be needed to resolve this imbalance.
Research shows that between 23-25% of UK households are already living in “water poverty” – generally defined in UK as when water bills take more than 3% of net household income. In some regions and among some demographics - such as single parent families and pensioners - the percentages are even higher.
This isn’t a new issue for water companies or regulators; numerous initiatives already exist to help households to benefit from safe, reliable supplies at a cost they can afford. The most common is the transfer of costs to better-off consumers through a cross-subsidy. While these costs are currently not large, we will need to ensure that the cohort of families who currently lie above the water poverty threshold are not themselves drawn into water poverty by such transfers.
What does the future hold?
Sustainable development, in the absence of climate change, is taxing enough: growing populations and increased demand for water from agriculture, industry and domestic consumption lead to increased pressure on readily-available water.
The amount of this water is reducing locally and regionally as concentrated local abstractions exceed local capacities, and regional resources are brought into play. Worldwide, water quality is increasingly compromised, through contamination by agricultural or industrial chemicals, local warming, increased turbidity, microplastics or less than adequate treatment of domestic waste.
The challenge when it comes to this returned water is generally financial. It appears too expensive to collect and treat wastewater to a sufficient standard to provide long term health for the water environment. Readily-available water is becoming rarer and the long- term cost of providing resilient, future ready supplies is increasing. A short-term focus on financial considerations is creating longer term economic damage. We are taking out a mortgage which future generations will have to pay.
Add in climate change and the associated volatility in resource availability and the task is going to be more expensive. We need to account for the legacy of over-exploitation and poor water quality management as well as make safe, reliable supplies available for all the new mouths in the future, in a more straitened water environment. All of this needs to be paid for, meaning, all things being equal, prices will rise.
What could we do differently?
In most other countries around the world, municipal water has always been metered. This has made it possible to create more sophisticated pricing structures. For example, usage above a “lifeline” amount is charged at increasingly higher tariffs, thus reducing cost pressures on the poorer customers; this is the so-called “rising block tariff” structure.
Rising block tariffs are widely used in USA, Spain and other regions – these provide a financial signal to consumers to help modify their demand behaviour. Studies in the US following prolonged drought periods, showed that a combination of rising block tariffs - which were gradually increased over a multi-year period - combined with support to help customers change water usage were effective in managing supply-demand imbalances. Tariff structures can be designed to support the necessary costs of new investment and so ensure that these costs don’t fall heavily on the most vulnerable.
With water utilities (in England and Wales at least) needing to demonstrate that they are creating social value, politically it may be a good time to consider this. In Scotland and Northern Ireland, where domestic water services are paid not on consumption but by rates, there is already an inherent ability to cross-subsidise and protect the least well off.
Whilst in theory next generation smart meters could allow real-time, or near real-time price adjustments, to help manage supply-demand and revenue needs, this is all some way off not least because the regulatory framework is not sufficiently developed. Companies in England and Wales are starting to install more intelligent meters, to help provide more detailed information about water usage patterns, which could allow closer management of demands and costs to the benefit of society and the environment.
Leaving no one behind? It’s a truly 21st Century challenge.
Mike Woolgar is Water Strategy Director, WSP in the UK
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