WWT ROUND TABLE 2009
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“This is not just an issue for water. It is one of the
are really on the brink, if the price rises
much they have to make some really
telling issues for any government environment
difficult choices and that is much trickier.
On the question of metering, we support
energy across the piece, it is still felt best to about price and value. I always remember the government’s position but I would not
do something for poor customers but not Ian Byatt – and I remember everything he under-estimate the challenge of actually
actually to differentiate benefits. There are used to say. One thing he said was that implementing that in terms of keeping
some benefits here, and logical reasons for customers value their water supply much customers on side. Richard has been doing
that which stand up. more highly than the price they are willing a great deal of work in this area on the
to pay for it. Can we have people really ground and the goodwill associated with
Bob Baty But in trying to develop a making price-based decisions if – and I take this, or the bad will associated with it, is
comprehensive system that, as far as the North East of England, where people potentially huge.
possible, is a one-size-fits-all, the difficulty are paying on average about 90 pence a
always arises when you come to these day. If you really go for it and save 20 per Bob Baty In terms of the South-west, where
marginal issues. Whatever the proportion is, cent, they are saving almost 20 pence. Do as Stephen said the uptake has been high
there are other mechanisms for dealing with prices have to rise, in order to drive those because of the charges, I do not think it has
that. This has been an issue in the industry pricing signals? generated a great deal of animosity from
for so long that it is difficult to believe that it customers. They have actually been anxious
has not moved forward. Tony Smith We do not really know what to do it, haven’t they?
the price for the elasticity of demand is for
Stephen Bird There has been a good deal water. That is an interesting point. Stephen Bird Yes, they are the winners.
of innovation. To say that the industry has The other issue relates to the subset of
not been innovative in trying to address customers who are most sensitive about John Cuthbert It comes down to my
that end of the spectrum would be unfair this, the losers, tend to be sensitive about all decision, Bob, and that is the point, because
in recent times. However, what it also sorts of things. One is having a meter at all, they have to bail at a level where they think
means, by definition, is that those in the because they are worried about the impact; they can actually influence it in a way that
middle will pay slightly more as a secondly, they tend to be the people who means something to them.
consequence. This has sometimes been a are most unreceptive to future price rises
stumbling block for an economic regulator, associated with further improvements. Bob’s Bob Baty Is that not an economic measure
where there is an element of cross-subsidy point is right that, if you can actually ease that you were talking about before – a
or call it what you like, between how you the burden on those customers in some mechanism that does that? It persuades
help out those who are socially way or another, then it is much easier. The them to go across but in time, of course,
disadvantaged, on the general tariff and message about it costing so much a day – that certainly comes around again because
then, okay, the punitive tariffs for those most customers say that that is not a the total cost of the service is still the same
with swimming pools or whatever. problem. However, for those customers who and has to be distributed, but it will come
We need to be a little more mature about back more slowly.
how we address the obvious social needs
that you have talked about and I think the Martin Hurst This is not just an issue for
industry is engaged in that. We also need to water, but it is one of the telling issues for
accept that, in addressing one, there are any government environment. What
consequences for others because there is economic theory says is that the first best
only so much money that has to be solution, or second best solution, is to
collected to finance these activities. internalise the externalities – in other words,
One of the problems I have with to work out what the full environmental cost
restricting the drive on meter penetration to of water is and shove it on the price, or
water stressed areas is that it implies that whatever else. Actually, however, the
nobody else needs to bother. If you are east government always has to make a careful
of the Tees/Exe line, nobody else needs to balance between the economic purist’s
bother. You will not change mindsets, in solution and a socially acceptable opt-out
terms of Ian’s challenge, if you do not say solution.
that this is a challenge for us all because we The fact is that, yes, there are probably
may end up moving water west of the some parts of the country where economic
Tees/Exe line to the South-east and there purity will say that the environmental cost of
will be a price consequence of that. You water is not borne at the margin – and not
therefore need to condition behaviours both close to being borne, I suspect. However,
east and west of the Tees/Exe line if you are whether the social consequences of that are
going to deliver that over the next 30 or 40 acceptable is another matter. The approach
years. we are taking at the moment is to say that
the first thing we have to do is get some
John Cuthbert Do prices have to go up, to price signals. John’s point is absolutely right
send economic signals? We talked earlier Bob Baty: Little customer animosity in that, in an optimal world, you would work
June 2009 Round Table 15