Smoke & Mirrors
The following article was written by Simon Cooper in the Fishing Breaks newsletter today.
I do things so you don’t have to. Having read the headline in the papers last week Water companies ordered to hand back £67m to customers and having found that just about every news organisation had faithfully regurgitated the Ofwat news release without further analysis I thought a bit of digging might be in order. After all, £67m might sound a fair bit of cash but with 29 million water bill payers that is collectively only £2.31 off your water bill next year.
A visit to the Ofwat web site (full title Water Services Regulation Authority with mission statement Improving life through water) is to enter acronym hell. The Home page starts out fine with a few friendly graphics but it takes some sort of inductive logic to which I am not privy to work out that the section headed “In-period ODI determinations” will give you the truth behind the £67m headline.
Of course, Ofwat don’t make it easy. This is, after all, a quango with an annual budget close to £40m so no surprise that I had to read 33 pages of dense, management-speak rich text to at least part understand the process that took Ofwat to that £67m figure which, by the way, represents less than half of one percent of total annual water bills in England and Wales. Literally and figuratively a drop in the bucket but let’s continue as that ODI determination process highlights how skewed the regulation process is against dealing with water pollution issues.
I will put you out of your agony and not save ODI for the quiz; it means outcome delivery incentives. Basically, it is the measure as to whether the 17 regional water and wastewater companies in England and Wales stick to the pledges made to their customers and stakeholders at the 2019 price review about progress towards service level commitments. [Sorry, I could not better rewrite that bit of quango speak]. If they do well (!) they can charge you, the customer, a bit more next year. If they do badly they have to give you back a bit of what they charged you last year. Yes, it really does work that way.
You’d have thought the ODI measurement would be pretty simple. Clean water into homes and businesses through pipes that didn’t leak too much. And then return that water to rivers and seas in a state a reasonable person might consider clean. As the youth would say, LOL.
But no. These are some of the outcomes by which the companies are measured: education performance. Visitors to recreation sites. Use of renewable energy. Greenhouse gas emissions. Per capita consumption. To be fair bathing water performance was included but five companies declined to offer any data (including Southern Water) in 2020/21 as the Environment Agency sampling regime was constrained by Covid. If there was any performance target required for clean rivers I could not find it.
So, there you have it. Performance targets that largely measure the outcomes that don’t address the basic problems of pollution. It is a typical Ofwat monopoly producer led fudge designed to muddy the waters; you get brownie points for a super-efficient pump that uses green energy even if that pump is spewing out thousands of tonnes of sewage.
You have to ask whether this whole process is worth the effort; it seems to be largely a PR effort by Ofwat to position themselves as the champion of the consumer against big water. The news release is heading in that direction by trumpeting the £67m that will be returned to some whilst being very coy about the fact that an extra £68m will be charged to others.
I’m sure if Johann Georg Schröpfer was alive today, the illusionist who invented the technique of smoke and mirrors in the 18th century to bring his seances to life, would consider ODI a worthy 21st century iteration of his nefarious craft.
A 1770 French smoke & mirror device