Thames Water s Thames Tunnel Consultation

Transcription

1 Thames Water s Thames Tunnel Consultation Consumer Council for Water response January 2011

2 Introduction 1. The Consumer Council for Water (CCWater) is the independent body that represents water and sewerage consumers throughout England and Wales. We have four regional committees in England and one in Wales. This response represents the interests of all Thames Water s (TMS) customers who will bear the costs of any waste water investment that the company is required to undertake regardless of whether they benefit from it. We welcome the opportunity to share our views and have structured this response to conform as far as possible with the company s online consultation format. Summary 2. We accept that the London drainage system needs to be improved. Work already underway by TMS will address many of the current problems associated with storm overflows. We recognise that the Government faces infraction proceedings if it does not fully comply with EU legislation relating to river water quality, and will therefore be at risk of incurring substantial fines if no further improvement is made. 3. The solution now being promoted by TMS, and endorsed by the Secretary of State, requiring a large storage tunnel to be constructed under the river Thames, would be the biggest single waste water management project since the industry was privatised in The Thames Tunnel project is currently estimated to cost 3.6 billion and, although nearly 20% cheaper than the previous preferred tunnel route, is said to add on average to all TMS s sewerage customers bills. 4. The cost of the Thames Tunnel project is additional to several other future pressures on customers bills, such as: transfer of private sewers and laterals to company ownership; extension to the company s metering programme; implementation of Water Framework Directive measures; and possible development of the Upper Thames Reservoir. The burden of these costs is likely to have significant affordability impacts for some TMS customers. These must be considered as part of the cost benefit assessment. 2

3 5. The history of this scheme suggests that costs have consistently been underestimated and some benefits overstated. The costs of the scheme have escalated despite the adoption of a shorter route for the tunnel (originally proposed by CCWater) and the reduction in the number of access points and shafts required. The potential for further cost escalation, and bill increases in excess of those already given, is therefore a major concern. Uncertainties over the options for the financial treatment of the project and the new planning approval processes and timescales add to these risks. 6. Customers need to know that the decision to proceed with such a hugely expensive project is based on robust cost benefit analysis, and that the outputs claimed do not overstate the potential benefits this scheme can reasonably deliver. Every effort should be made to further reduce costs while avoiding short cuts or shorttermism. Ultimately the chosen solution must be fit for purpose. TMS should be made accountable to customers who will bear the costs of the project. 7. Customers willingness and ability to fund this project should be a key consideration. Future water charging arrangements must provide protection for low income customers and must be fair, justifiable and affordable. Government, Regulators and TMS all have a part to play in this regard. 8. We have extensive evidence available in support of the points we make in this paper, and would be pleased to discuss this further with TMS. The Need, Solution and Tunnel route Question 1: There is a need to significantly reduce the amount of untreated sewage entering the river Thames in London 9. We do not question the need for improved capacity in London s sewer system. We agree that the present frequency and volume of overflows is unacceptable. We therefore accept that significant investment is required to address these problems. However, we have already been able to demonstrate that the cost of the original preferred option could be reduced and there may be scope for further reductions in cost while remaining fully compliant with the Urban Waste Water Treatment Directive (UWWTD) requirements. 3

4 Questions 2 and 3: Is a tunnel the right way to meet the need? The Proposed Tunnel/other options 10. From the information provided it would appear that the tunnel option is preferable to the other options; the alternatives explored by the Thames Tideway Strategic Study (TTSS) Group ( ) are either much more expensive or much less likely to achieve compliance with EU legislative requirements. 11. However, under the terms of the UWWTD there is a test for excessive costs, whereby the cost of a solution is compared to the potential damage arising and allows Member States some discretion over the degree to which best available technical/engineering solutions are used to mitigate that damage. We would welcome clarity on: whether and/or how this test has been applied to the latest proposal and how UK interests (protection against risk of infraction proceedings) have been balanced against the interests of existing and future TMS customers (who will pay for it). 12. We consider that, given significant changes to the project and economic conditions, a revised Regulatory Impact Assessment (RIA) should be produced taking account of the questions we raise here. This RIA should include assessments of: the proposal and its likely compliance with the UWWTD; costs and benefits; and the distributional impacts of the proposed project in the context of other pressures on TMS customers bills, and suitable mitigation for low income households. Costs 13. The estimated cost of the project has escalated, from 1.7bn in 2004 (including Lee Tunnel and sewage treatment works (STW) costs) to 2.2bn in 2007 (also including Lee Tunnel and STW costs) to 3.6bn now for the shorter Thames Tunnel as far as Abbey Mills, plus some 1bn for the Lee Tunnel and upgrade of works at Beckton. The total costs of all the Tideway schemes have therefore increased from 1.7bn six years ago to 4.6bn today (all costs at relevant year prices). There is no guarantee that the current estimate will not be subject to further escalation. 4

5 14. These costs will potentially be borne by all TMS s sewerage customers. Yet there have been varying estimates of how projected spend of 3.6bn will increase customer bills: around per year, according to the Secretary of State s statement on 7 September 2010; on the average bill by 2018, according to TMS public consultation; and 40 per year, according to a recent Parliamentary Question. Such inconsistencies are confusing. 15. Compulsory metering will tend to increase the range of bills around the average, with larger households with higher water use paying most as this will determine the size of the sewerage bill. In addition there are other cost pressures yet to be finalised that are likely to fall in the same period: costs of the second cycle of WFD expenditure; transfer of ownership of private sewers and possible sustainability reductions confirming the need for the Upper Thames Reservoir. In our view, the very real risk of further cost overruns of the tunnel, combined with these other cost pressures, mean that customers are facing bill impacts that are likely to be far higher than those estimates given so far. 16. It is imperative that customers are provided with an accurate picture of bill increases derived from the costs of this project, and other likely pressures on bills, how such bill increases will accumulate over time, and how long they will last. 17. The Secretary of State has said it will be for Defra and Ofwat to scrutinise costs and options to ensure that Thames Water s proposals represent value for money. We would welcome clarity on the process for such scrutiny, including an assessment of whether the tunnel will be fit for purpose. 18. It is important for the legitimacy and fairness of the Government decision on major infrastructure projects that those people who will have to pay are given a say in how it is taken forward. We would also wish to see the costs attributed to this and other major infrastructure schemes shown separately on water bills to allow customers to see how these investments are impacting on their bills and so that assurances about bill impacts are seen to be delivered. Impact/Benefits 19. Customers need to know that the cost benefit analysis in support of a tunnel is robust and can be trusted. Early scrutiny by CCWater found that elements of the case made could not be justified and had little credibility. For example, claims related to the prospects for return migration of salmon, which is now accepted as being unlikely due to other factors related to climate change and river temperatures. 5

6 20. Moreover, it was stated the tunnel would be needed to protect public health. Further examination reveals that these may also have been overstated by not using conventional methodologies. It seems unlikely that the tunnel will bring the river within nationally accepted bathing or recreational water quality standards and the marginal reduction to the low present incidence of illness cannot be guaranteed. 21. Professional advice on the scale of health benefits is important. The 2007 RIA noted (following our suggestions) that there was a conflict of evidence between conventional ways of assessing health benefits (QALY estimates indicated a net present value of illness avoided at 1.5m) and stated preference survey valuations of up to 4bn. These values were given by respondents who were given only data about exposure to pathogens, not about risk which remains high even if a tunnel is built because treated effluent is not disinfected, nor about incidence of illness (now confirmed to be very low in a completed study for the Port of London Authority by the Health Protection Agency). 22. The substantial carbon costs associated with a project of this nature should be quantified and properly addressed. These include carbon costs associated with excavation and removal of hundreds of thousands of tonnes of spoil, and the manufacture of concrete and other materials for the tunnel. 23. It is imperative that these questions and concerns be addressed. Customer engagement and accountability 24. The Independent Review of Charging and Metering by Anna Walker supported our views regarding the importance of engaging consumers on investment choices. The final report concluded that: water customers must be involved in these decisions if they are to pay these costs...if customers are not involved, they may well feel prices are unfair and resent paying them, as has occurred in the south west. Wider customer engagement is therefore necessary. 25. On new environmental investment, the Walker Review Team concluded that the UK and Welsh Assembly governments should be required to: ensure household customers are engaged in consultation on the proposed changes through the Consumer Council for Water s regional committees. 26. The costs of the Thames Tunnel will be borne by all of TMS s sewerage customers, of which there are currently 13.6m. Many of the customers, who will pay for this project, do not live near London or the river Thames and did not create the 6

7 pollution that this tunnel aims to remedy. These customers will therefore receive little or no benefit from a cleaner river some distance away from where they live, whilst being required to share the costs of achieving it. 27. Without careful engagement of such customers, a similar situation to the one experienced when churches, scouts and others forcefully and successfully objected to paying for surface area drainage charges in the North West could arise. 28. CCWater considers that the TTSS Group should be reformed and reinvigorated so that key stakeholders could continue the previously close dialogue on these issues to ensure that all options for further cost reduction are being explored; alternative financial treatments are of genuine benefit to customers; and the revised RIA is robust in its assessment of ecological and public health benefits; and the distribution of costs is appropriately addressed by future charging mechanisms. Questions 4 and 5: The preferred route 29. CCWater supported the Lee Tunnel project, and pressed the company and the Government to explore an alternative route for the Thames Tunnel so that it joined the Lee Tunnel at Abbey Mills, avoiding some 9km of full diameter tunnel compared to the previously preferred option. We therefore welcome TMS s decision to now adopt this as their preferred route. 30. The Abbey Mills route costs 748m less than the former preferred option in which the Lee and Thames Tunnels met at Beckton. From the information contained in the consultation this route should be less intrusive and have a lower carbon cost. TMS have also reduced the number of vertical shafts first proposed. 31. We do not intend to comment specifically on individual site proposals. We welcome the company s efforts to consult and engage with the local authorities and residents along the proposed route of the tunnel. Already local concerns relating to the siting of construction and access points are emerging and should help the company to consider possible workable alternatives. TMS has stated its commitment to giving full consideration to the representations it receives. 32. Loss of amenity should be included as a cost in the cost/benefit analysis. It will be most pronounced during the likely seven year period of construction but in some cases loss of amenity will be permanent owing to the above ground constructions and access routes that TMS will need in perpetuity. We are aware of such issues at the King Edward Park, King's Stairs and Barn Elms sites. 7

8 33. While local nuisance, environmental impacts and loss of amenity are important factors for the company to address, the priority for customers generally will be for the costs of the proposed scheme and any variation in proposals to be contained. Local negotiations must therefore be undertaken with this in mind. Question 5: Other comments on the project Compensation costs 34. It appears that there will be further costs associated with land acquisition and compensation costs related to property blight that have not yet been factored into the current scheme cost estimates. We would like to know what these costs are likely to be and what affect they will have on TMS s customers bills. We appreciate that this will probably form part of the next stage of consultation, once a final route and sites have been selected. Odour nuisance 35. Ventilation shafts will replace the air in the tunnel every 24 hours. We know that odour nuisance is already a particular issue for people living near sewerage infrastructure/plants and can affect a wide area. It will be important for the company to address this potential problem. Residents may be concentrating on the immediate environmental and visual effects of the construction rather than future operational activity when commenting on proposals. The company should be clear about the likely odour impacts and do everything it can to avoid such problems arising in the future whether through the scheme design or its operation and maintenance regime. Conclusions 36. In conclusion: I. We have consistently argued that the investment case for the Thames Tunnel should be assessed in the light of all the other pressures for expenditure to be borne by water customers, and related to the likely impact on Thames customers water and sewerage bills and their ability to afford resulting increases. An attempt was made to do this in the 2007 RIA. As costs and other factors have now changed significantly, the exercise should be repeated. II. There is a clear risk that long term bill impacts will be severe for some groups, and that in conjunction with compulsory metering the burden of supporting 8

9 environmental investment may in future fall more heavily on lower income groups. III. There is also evidence that the value for money of the Thames Tunnel scheme is questionable. Costs may escalate further, and values may have been overstated. It is therefore essential that before decisions are taken the company addresses concerns about value for money of this scheme; and the ability of this scheme to bring the water quality of the river Thames to the standard required by the Urban Waste Water Treatment Directive and the Water Framework Directive. Enquiries Please address any enquiries to: Karen Gibbs CCWater London and South East 5 th Floor 11 Belgrave Rd London SW1V 1RB karen.gibbs@ccwater.org.uk 9