Water problems

Speech to the Senedd on 24th April 2024 in response to the Climate Change, Environment, and Infrastructure Committee report on the performance of Welsh Water

I’m very pleased to see the scrutiny of the performance of Dŵr Cymru. There is lots of goodwill towards a company that it is, as it says, for Wales and not for profit. But I do think that at times that goodwill has constrained the scrutiny and challenge that all organisations need.

As the regulator Ofwat said to the committee, the not-for-dividend model “shouldn't excuse poor performance and it shouldn't excuse inefficiency”. I couldn’t agree more.

Without the pressure and scrutiny of shareholders there is a particular need to ensure there is robust questioning of the company’s performance. I am not convinced that the model of scrutiny of the so-called Members of Dwr Cymru has proven itself. And there are questions to be answered by OfWAT too.

It seems to me that the different model in Wales has not had the bespoke engagement that it needs nor deserves. That applies as much to performance on the one hand, as it does to recognising Welsh Water’s long-term objectives that don’t apply to the other water companies it regulates. I think they have applied a one-size-fits-all approach which in effect has not served people in Wales well.

OfWat told the committee there is an ‘accountability deficit’ which arises from Dŵr Cymru’s ‘not-for-profit’ status. Well, frankly, it’s their job to regulate. It’s not their job to second-guess the ownership model. It is their job to work with it, and allow Dwr Cymru to meet its mandate to its customers.

We’ve seen from Thames Water that shareholder companies under-perform too, have poor governance. And OfWAT didn’t do their job there either.

I am glad Dwr Cymru is not an orthodox share-holder run company. The scandal at Thames, and the obscene amount of money that has been allowed to be extracted from the company and turned into debt is a damming indictment of the privatisation of this wellbeing critical utility.

Just like bus privatisation, where passengers numbers have collapsed and the number of routes shrunk; or rail privatisation, where now all the franchises have handed back their contracts to central government; and gas and electricity privatisation where an energy crisis has seen record profits alongside record fuel poverty. Just like all of these examples, water privatisation has failed to live up the promises made by Margaret Thatcher.

And we are all now living with the consequences, and having to mop up this market failure.

And the result of the shortfall of long-term investment that OfWat has constrained is being seen in Llanelli.

Overwhelmed sewage systems regularly lead to discharges which harm water quality. House building without proper infrastructure is adding pressure to an already overloaded sewage system. Which results in excessive volumes of effluent which has nowhere go other than into our rivers and Seas.

Cockles and other shellfish have disappeared from the Estuary altogether - causing real harm to a cherished local industry. You can still get a bag of Penclawdd cockles from Llanelli’s lovely market, but they are often very small, and the haul collected by cocklers is much diminished.

Local campaigners Bill Thomas and Robert Griffiths tell me Dwr Cymru admitted to discharging over 6 million metric tons of raw sewage into the Estuary all of which contaminated cockle beds. That was six years ago and they are adamant that the cocklers report the situation has worsened.

NRW are struggling to fulfil their duties as a regulator. The committee report says that NRW are not happy that Dwr Cymru has been given a 2* rating for environmental performance. Indeed they say their aim is for zero pollution incidents.

But in their evidence they said they only meet with Welsh Water, alongside the other regulator Ofwat, once a year for a regulatory meeting.

That’s not good enough.

They seldom pursue prosecutions for breeches and as the committee says, and unlike the Environment Agency in England, they cannot require ‘environmental undertakings’ that can offer a viable alternative to prosecution. I agree with the committee’s recommendation that the Welsh Government should give consideration to this.

Llywydd, there are no simple solutions.

I have some sympathy with Welsh Water's position that the complete upgrading of our sewer system would need a capital investment of somewhere between £7-11bn. That would not only have an opportunity cost, but would generate and enormous amount of embodied carbon - which would add to broader environmental harms.

This is a good example of what the academics call a 'wicked issue'.

The fundamental problem through is the privatised framework that Dwr Cymru has had to operate within, and the amount of investment that has been sanctioned. The legislative framework needs to be changed at a UK level and in the meantime Welsh Water and OfWAT have much more to do.

And let the first step be action on each of the committee’s recommendations.