MAKING THE CASE FOR METERING

Fairness on Tap: making the case for metering 1

About Fairness on Tap

Fairness on Tap is a coalition of organisations calling for a fair deal for water - for customers

and the environment. We include:

 Angling Trust

 Association of Rivers Trusts

 Buglife

 Chartered Institute of Water and Environmental Management (CIWEM)

 Great British Refurb

 Green Alliance

 National Trust

 RSPB

 Salmon and Trout Association

 Society of British Water and Wastewater Industries (SBWWI)

 Unison

 Waterwise

 Wildfowl and Wetlands Trust

 Wildlife Trusts

 WWF-UK

We are calling for the government to set out a strategy to install water meters in at least the

80% of England where there is greatest pressure on the freshwater environment and

people's pockets, by 2020. This must be supported by fair tariffs to make water bills

affordable for everyone and help to reduce water waste and protect the freshwater

environment.

This report was written by Vicky Garner (Campaign Manager, Fairness on Tap), Rose

Timlett (WWF-UK) and Nicci Russell (Waterwise). We would like to thank all those who

helped contribute to this report, providing information and insight as part of our Fairness on

Tap discussions. In particular we would like to thank all the families who have shared

information on their experience of water metering and have volunteered to be included as

case studies, as well as Anglian Water, Southern Water, South West Water, Age UK, the

Women’s Institute and the Citizens Advice Bureau.

For more information on Fairness on Tap visit www.fairnessontap.org.uk

Because of the different regulatory and political context in Northern Ireland, Scotland and

Wales, this document relates to England only.

June 2011.

Fairness on Tap: making the case for metering 2

Contents

Foreword 3

Fairness on Tap: 3 steps to sustainable, affordable water 5

1. Metering 6

2. Tariffs to ensure water is affordable for all 10

3. Help to save water and cut bills 13

Frequently asked questions 14

References 18

Fairness on Tap: making the case for metering 3

Foreword

Water charging in England and Wales was designed two decades ago and urgently needs to

be brought up to date. Current water consumption is not within sustainable limits, wastage is

high, our natural environment is under significant stress and millions of customers struggle to

pay their water bills - all problems set to get worse with climate change and rising population.

Today’s system, based on 1974 rateable values, does not reflect water use nor does it

protect many low-income families from unaffordable bills. We simply can’t afford to turn a

blind eye and carry on, business as usual.

While there are a huge variety of opinions making up the water metering debate, it seems

that everyone – water companies, environmental, social and consumer organisations,

regulators and government – agrees that if we were starting from scratch we’d create a

water charging system based on metering.

The Fairness on Tap coalition believes that we need to move to a fairer charging system

based on water metering supported by social tariffs, good customer service and help with

water efficiency. This would ensure that water is affordable for all and encourage reduction

in water demand, reducing the stress on our environment in the process.

Water metering has long been on the agenda of environmental organisations. We think it is

the obvious backbone for a fair and sustainable water charging system. However,

organisations concerned with the welfare of individuals and families rightly raise concerns

about affordability. The fact is, there is a cost to metering. It is also true that - for some -

paying for water on the basis of what they use will cost them more than under the present

system, where low water users subsidise the bills of households who use lots of water. And

since a sprinkler can use more water in an hour than a family of four uses in a day, water

efficiency can bring down bills significantly. It also has spin-off benefits for household energy

consumption – a third of the average gas bill goes on heating water in homes.

Water metering does not need to make water unaffordable to anybody. There is a cost to

putting in a meter, but those costs come down if they are installed systematically (by

requiring every household to have a meter on a compulsory basis). And, over the medium

and longer term, using meters to help reduce demand for water will be far less costly then

building expensive new resources. There are those on low incomes who will undoubtedly

need help paying their bills, but by putting in place the right system of tariffs, well-thought-

out, well-targeted and combined with help to waste less water, we can properly address

these concerns too.

The new approach that we are advocating is squarely in line with the independent Walker

Review and a cross-party Committee of MPs, who have recommended that the government

set out a path to higher levels of metering, as the central pillar of a more comprehensive,

robust and fair water charging system.

It’s clear to us that the main barrier to metering today is not based on fact, but on

misconceptions and fear. During the course of our Fairness on Tap discussions we have

found that the water metering debate is blighted by scare stories - by worries that metering is

just another way for water companies to make money or that affordability measures won’t

Fairness on Tap: making the case for metering 4

really work. These cloud the issue, making it harder to see the value of metering in delivering

value for money, fairness, affordability and the all-important water in our taps. This is exactly

why it’s time to open up the debate and - working with the evidence - build a water charging

system that delivers for customers and the environment.

Jacob Tompkins

Managing Director, Waterwise

David Nussbaum

Chief Executive, WWF-UK

Fairness on Tap: making the case for metering 5

One third of households in

England and Wales pay by

meter. Water company

investment plans suggest

this will rise to 50% by

2015. Under the current

approach 80% of

households in England

and Wales will have a

meter by 2030, as

households choose to opt

for a meter. A strategy to

install meters

systematically, rather than

one-by-one, has the

potential to reduce

installation costs by up to

50% (saving £1.5 billion).

“For each low-income

household that benefits

from being in the lowest

rateable value band,

almost twice as many

middle-and higher-income

households get that same

benefit – so only about

30% of the help accorded

to the lowest rateable

value band is going to the

poorest households...

Almost 40% of low-income

households live in the top

six rateable value bands.

As a result [many will] be

cross-subsidising other

households on higher

incomes in lower rateable

value properties”.

The Walker Review

Fairness on Tap: 3 steps to sustainable, affordable water

The current system of charging for water in England and Wales isn’t working. It doesn’t

encourage efficient and sustainable use of water and it

isn’t supporting those who need help paying their bills.

At present, water charging is based on property rateable

values, with allowances for people to opt for water meters

if they wish. In addition, water companies in water stressed

areas can apply to install meters on a compulsory basis in

areas where they can demonstrate that metering is the

most cost-effective approach to meeting water demand.

While some companies, including Anglian Water, Southern

Water, South West Water and Veolia Southeast have or

are planning near-universal or very high levels of metering

by 2015, there are still some companies with much lower

levels. (It is worth noting that some companies, such as

Thames Water and Veolia Central, included enhanced

metering programmes in their draft 2010-2015 business

plans, but these were not approved by Ofwat in their final

determination.

)

The rateable value system was designed to be progressive - those on lower incomes paying

less for their water than those on higher incomes. However, it is now out of date - with

significant consequences. The central assumption has become increasingly tenuous and

there is now little correlation between the rateable value of a property and household

income. As a result many low-income households face

higher bills because they live in a high-rateable value

property and many high-income households pay lower bills

as they live in a low-rateable value property.

The rateable value charging structure does deliver some

financial relief to some of those who need it, but it is not

very well-targeted.

There are around £600 million of

transfers (cross-subsidies) between rateable value bill

payers each year – only £180 million of this is going to low-

income households (with some of that coming from other

low-income households).

The remaining £420 million is

subsidising those who don’t need help paying bills, and

some of this is comes from those who themselves need

help.

Affordability of water bills is already an issue for some

households in England, and more so in those regions

where bills are high. The South West Water region has the

highest water bills in the country. Here, 200,000 people are

in water poverty (defined as spending more than 3% of

Fairness on Tap: making the case for metering 6

Fairness on Tap urges the

government to set out a

strategy to install water

meters for all over time

and in at least the 80% of

England where there is the

greatest pressure on the

freshwater environment

and people’s pockets by

2020 at the latest.

Metering means we pay for

what we use, giving us

more control over our bills.

On average, meters result

in water savings of 25

litres per person per day

(due to reduced leakage

and consumption).

income on water and sewerage bills); however, water poverty is a national issue – for

example in the Thames Water region over one million people are in water poverty.

The current system is also in transition. Just over one third of homes in England and Wales

pay for water using a meter; by 2015 it will be half.

Water metering is highest where water is

scarce or the price of water is high –in the east, southeast and southwest of England. As

more people opt to have a meter installed, a two-tiered system develops, with people on a

meter paying less than those paying by rateable value (as bills are ‘rebalanced’). As

customers switch to meters, the existing cross-subsidies unravel as fewer and fewer

unmetered customers are left to subsidise the bills of the remaining larger unmetered users.

The average metered bill in England and Wales was £312 for 2009/10, compared to £367 for

the average unmetered bill.

The disparity is higher in areas with high metering rates – e.g.

in the South West Water area, the average metered bill is £401 compared to the average

unmetered bill of £723.

As people opt for meters, households who continue to pay bills

based on rateable value charging will shoulder a growing proportion of price increases.

As the costs of water rise and more people opt for meters, the affordability issue needs to be

tackled because affordability support within the existing charging structures becomes

increasingly unfit for purpose. There is a clear need to address this through a

comprehensive, strategic approach to metering, supported by government.

In 2009, the government published The Independent Review of Charging for Household

Water and Sewerage Services (the Walker Review). It raised “significant and growing

concerns over the current mixed charging system”, identified that “Rateable Value no longer

targets those who need help with their bills” and highlighted

“the current system also does not incentivise the efficient

use of water”.

It concluded that charging by volume of

water used – using water meters – was the fairest way to

pay.

The Fairness on Tap coalition is calling for metering as part

of a fairer system of water charging. We believe that there

are three essential steps to sustainable, affordable water:

metering; a national policy on social tariffs to ensure water

is affordable for all; and help to save water and cut bills.

STEP 1: METERING

The fairest way to pay for water is to each pay for what we

actually use. Doing it this way means we don’t have to pay

for someone else wasting water and we are in control of

our bill. Research shows that customers think it quite

wrong that two neighbours in identical homes pay the

same if one is a single person household and the other is a

family of four using much more water.

It also means we

can all get a better handle on the amount of water we use

day to day, which - as water resources get scarcer and the

population grows - is becoming increasingly important.

Fairness on Tap: making the case for metering 7

“There are two of us, living in a 3

bedroom property. Having a meter has made us more

aware of our consumption and it has also helped us

save a considerable amount of money, over £200 a

year. I put the timer on if I have to water the garden, but

have also installed a water butt and therefore have

saved quite a lot. We use a bucket to wash the car,

and only the hose to swill off afterwards. We save a

couple of jugs of water as we turn on the hot tap and it

initially runs cold, which is used for the iron, watering

indoor plants, steamer etc. We have more showers

and fewer baths, but otherwise our habits haven't really

changed. Like electricity and gas, we are now aware

that consumption costs, but don't intend to flush the loo

less, or actually cut back on water usage. Yes we were

dubious about changing, but I'd used the guide on the

website, which seemed feasible, and knowing that we

had a 12 month trial decided to go for it. We switched

when we realised that with only two of us living in a

three bed detached, fairly high rated property we were

bound to gain, and this we have done.”

By metering the water we use, not only can we

keep track of what we are using and discover

ways to reduce waste and our bill, we can also

spot when we have a leak in the house.

Improving our understanding of both water

consumption and the water network will allow

water companies to understand when and where

water is used. This will help them to better plan

supply to homes and businesses and identify

leaks and waste in the system. Metering will also

enable companies to take more targeted action

to cut waste, by targeting support at those

households who use the most water, or have

leaky appliances in their homes.

The national water metering trials conducted in the ’90’s suggested that on average a home

with a meter will use 10 – 15% less water than a home without, with up to 30% reduction at

peak summer times.

These figures have been supported by studies undertaken by

Southern Water (which currently has 40% of customers on meters and plans to increase this

to 92% by 2015) and South West Water.

More efficient use of water means less water is

taken out of the environment, bringing environmental improvements to the one third of river

catchments which are at risk from over-abstraction.

By using water more efficiently (helped

by switching to a metered supply), we help avoid the need for costly capital investment in

new water resource development to meet the demands of a growing population – and help

manage these demands.

During the driest months, when

demand for water is at its highest,

meters can help deliver greater

water savings: in the national trials

households with meters did more

to reduce discretionary use at peak

times, resulting in 30% savings.

Reducing peak consumption also

reduces the likelihood of

restrictions in the driest months: in

turn helping secure supply for

essentials such as healthcare, and

for economic growth.

It is inconceivable that for goods

such as fuel and food we could pay

a set amount and use as much as

we like. Metering provides people

with an incentive to be efficient

with water use and prevent waste.

Without meters, we all pay for the

excesses of a few water wasters.

Waterwise. 2010.

Fairness on Tap: making the case for metering 8

“Before I had a water meter

fitted, I was not bothered how many baths I had or how

much water I wasted, especially as my water bill was

so dear! I decided to get a meter fitted as I had nothing

to lose- I could get it removed within a year if it ended

up being too expensive. Now, I am careful with my

water, for example I don’t run the tap constantly when

brushing my teeth and I have more showers then

baths. I teach the children to be careful too with their

water wastage. It has saved me so much money,

despite being a 7 person household!” Southern Water

customer, saving over £30 a month since switching

to a meter.

“We are a family of four living in

Cornwall. Before we had a meter fitted we paid £745 a

year for our water and now we pay around £227 a year!

We are careful with the water we use, the children are

very aware of wasting water and they know we pay for

what we use. The children share a bath and me and my

husband tend to shower. None of us leave the tap

running when we’re cleaning our teeth! We don’t have

any water saving devices – our toilet is a modern one

so it doesn’t need a hippo but I have just ordered

something for the taps!” Family living in a 3 bedroom

property, South West Water region

Paying by meter is the fairest way to

pay for water. This is a view shared

by the Fairness on Tap coalition,

Defra,

the Consumer Council for

Water

and the Walker Review and

supported by customer surveys:

 57% of respondents supported

metering as being the fairest

basis to charge – Consumer

Council for Water / Ofwat

research, 2008.

 77% of customers were or

would be happy to be charged

for the water used as measured

by a meter – Southern Water

research, 2010.

Aside from the financial incentives of paying for what we use, there are a number of reasons

why meters can help save water. Many of us are unaware of our household water

consumption and this is one of the primary causes of domestic water wastage. In a Southern

Water survey, 62% of metered customers said that they were more careful with the way they

use water since having a meter installed.

In a national survey, people with meters were

much more likely to say that they pay attention to how much water they used at home, than

unmetered households.

In another survey, people said that they want and need to be

equipped with the right information and effective technology to enable them to monitor and

ultimately limit water consumption

- that’s where meters come in.

Customer research shows that

households want to use water more

efficiently and are prepared to make

changes to do so – but they need the

right tools.

To realise the full

potential for water efficiency gains

metering must be part of a package

that also includes advice to

householders on how they can reduce

water (and energy) wastage and other

help – such as low-cost adjustments to

make taps, toilets and showers water-

efficient.

In combination these can

deliver greater water savings - savings

which reduce day-to-day water use

with little change in routine.

Meters and the information they provide should become the backbone of any future charging

system. Paying for what we use is not only the fairest way to pay for water, it is also the only

way to build the clear picture of patterns of water consumption which will be needed to move

forward sustainably and to ensure that water is affordable for all in the long term. Meters

Fairness on Tap: making the case for metering 9

“Having the meter made me more aware that what I

consume would affect my bill. I certainly have taken up

some actions to reduce water use - whether that be not

leaving the tap running or using a water butt to water

the garden - as its more obvious now that the less

water I use the more I can save on my bills. I save

about £10 a month on my bill with a meter”. Couple,

high-rateable value property, Anglian Water area.

allow water companies to understand when and where water is used, helping them to better

plan operations and investment and identify leaks and waste in the system.

Many water companies in England have significant metering programmes. Southern Water,

for example, is planning to install water meters at no upfront cost to 92% of customers’

homes, as it believes that this can reduce demand by enough to cover the water needed for

population growth for the next 25 years at least, without any costly new reservoirs or

treatments raising bills.

Anglian Water currently has 68% of its customers’ homes metered

and plans to increase this to 80% by

2015 (installing or replacing one

million meters). The company

supplies the same amount of water

now as it did in 1989, which “is

largely due to our high meter

penetration/leakage control and

water efficiency”.

The Fairness on Tap coalition

believes that water meters, installed as part of a package giving every household the chance

to significantly reduce the amount of water they use and help to cut their water bill, are

central to a fairer system of paying for the water we use as well as protecting the

environment.

What do others say about water metering?

House of Commons Environment, Food and Rural Affairs Committee, January 2011: “Metering

has a key role to play in helping to reduce water demand. Such reduction is essential given increasing

pressure on water resources in some parts of the country. The current approach of introducing

metering in a piecemeal manner means that the charging system is under stress, with those on

unmetered supplies bearing a progressively higher proportion of costs. A comprehensive, robust and

fair charging system for the future is needed with higher levels of metering forming the central

pillar....We recommend that the Water White Paper set out a clear strategy for implementation of

metering and for variable tariffs to help spur water efficiency”.

Anna Walker, The Independent Review of Charging for Household Water and Sewerage

Services, June 2009: “while the regulatory regime in the water industry has served customers well

over the last twenty years, we now face considerable new challenges. Changes are needed to ensure

we are ready to meet these. The charging system can play an important role in doing so....It is very

important that the charging system should incentivise the efficient use of water to ensure we have a

sustainable water supply…The report concludes that charging by volume of water used (which

requires meters to be installed) is the fairest approach to charging... The currently largely optant

system is a very expensive way to install meters...The report suggests that if it’s recommendations

are adopted, about 80 per cent of households in England will be metered by 2020”.

Environment Agency, August 2009: “The shift to wide scale metering is essential for the long term

sustainability of water resources. Metering is the foundation for reducing per capita consumption

which is critical for the accommodation of growth, environmental sustainability and adaptation

/resilience to climate change....A fair charging system is one based on the principle of cost reflective

charges.”

Fairness on Tap: making the case for metering 10

“Volume-related water charges have a vital

role to play in encouraging behaviour change,

and they are the fairest way to pay. So we

think that there is a strong case in principle

for a faster transition to more widespread

metering. Whatever the speed of the

transition, the companies must make it

acceptable to their customers. This should

include safeguards to protect those

vulnerable and low-income households

whose bills would increase”. Ofwat. 2011.

STEP 2: TARIFFS TO ENSURE WATER IS AFFORDABLE FOR ALL

The Fairness on Tap coalition believes that everyone should be able to afford to pay for the

water they need - metering must go hand in hand with tariffs to ensure that people who need

help with their bills get that help.

The Flood and Water Management Act

2010 requires government to produce

Ministerial guidance on water tariffs to

support vulnerable customers. Setting out

a strategic approach to significantly higher

levels of metering, accompanied by a new

system of tariffs to make charges fair and

affordable, would be the most effective

way to address affordability concerns: one

cannot be implemented without the other.

A move to near-universal metering will result in some customers paying less and some

paying more for the water they use. Typically, small families, couples, pensioners and sole

occupants (low water-using households) benefit from a switch to meters, while high water

users pay more. This can mean that, for some low-income, high water-using households

(typically larger households with children or those with high levels of essential water use

because of medical reasons), water becomes unaffordable. We agree with the Consumer

Council for Water, when it states: “it is therefore essential that appropriate safeguards are in

place before compulsory metering is undertaken to ensure that low income customers are

protected...”

The Fairness on Tap coalition believes water is an essential of life - if it is unaffordable, it is

unacceptable. No one would pretend that by having a water meter installed every single

household will be paying lower bills. How we use water and the scarcity of water where we

live will continue to affect the price we pay. But water meters (particularly smart meters) give

us all the opportunity to use water wisely. With targeted, smarter tariffs, we can make sure

those who need help paying for water get help.

Tariffs have an essential role to play in incentivising efficient use of water, reducing bills and

ensuring that those who need help paying their bills can access help. We believe that the

tariff package should include:

 Social tariffs to help ensure water is affordable

 Transitional tariffs to help people move to the new charging system

 Rising block tariffs to provide incentives for water efficiency.

Social tariffs to help ensure water is affordable

A social tariff could provide a discount to all metered

households which are in water poverty

– including the working poor as well as those claiming benefits. Information on water use

and household income is essential to ensure that such a tariff is appropriately targeted.

Consumer Council for Water research illustrated near-universal agreement that pensioners

and people with disabilities should qualify for social tariffs and people on limited incomes

may also need help.

Fairness on Tap: making the case for metering 11

WaterSure currently provides support to low-

income metered customers (with three or

more children or with high essential use for

medical reasons) by capping water bills. It

helps ~29,000 customers in England and

Wales, funded by other water customers (on

average adding less than £1 to bills). Some

charitable trusts also assist customers

experiencing difficulties and some water

companies have introduced specific social

tariffs (e.g. Wessex Water’s Assist scheme).

The Walker Review proposed that low-

income households should get water at

a price below the norm for their area,

particularly those with high usage due to

medical needs and those with children. It

suggested that this be delivered through

a closely-targeted package of tariffs

based on caps and discounts on bills,

and strict eligibility criteria.

Under the current level of transfers

under rateable value charging, the water

customer funds affordability measures. These transfers take place within water company

regions (there are no cross-subsidies between company areas); if water customers were to

pay for a social tariff on a regional basis, this could be seen as a continuation of the norm.

The disadvantage to this approach would be apparent in areas where bills are high - in order

to make a real difference the impact on the wider regional customer base would be

significant.

An alternative would be to spread the affordability help across the water industry. This would

involve a ‘national pot’ funded by water customers, enabling the bills of those qualifying to

access it to be capped at a set level (such as the national average metered bill). This would

address the vast regional differences in water bills, giving more assistance to those in areas

where bills are high (in order to reduce their bills to the level of the cap) without impacting so

extremely on other bill payers.

Some argue that it should be government’s responsibility to pay for a social tariff (as the

problem is part of general poverty, and support from the taxpayer would be on a progressive

basis). In essence this means paying through the tax and benefits system. Walker proposed

two possible packages along these lines: one for all low-income customers costing around

£340 million per year, and; a narrower package at £110 million a year (small in contrast to

government funding for the energy sector on fuel poverty).

Consumer Council for Water research: views from the customer’s perspective

This research indicated that if customers are to make a contribution to addressing increasing cost

pressures through a small increase in bills, government and companies should also play their part.

There was universal support for helping those on low incomes and a clear view about how such

support should be delivered (a strong preference for use of social tariffs rather than the benefits

system to ensure that support helped pay water bills). Customers think funding social tariffs organised

and paid through government would offer some clear advantages – costs can be shared more widely,

it can be done as one complete industry-wide scheme (which was felt to be fairer than having different

rules in different places). A number of customers suggested that support should be linked to metering

to ensure that anyone who benefits from lower bills is also encouraged to use water efficiently.

It is clear that there needs to be a package of measures to tackle the different aspects of

affordability and that any support must be carefully targeted, using household water use and

income as benchmarks. How exactly they are delivered is ultimately a choice for

government, with vital input from customers. With the cost of debt recovery adding £12 to

Fairness on Tap: making the case for metering 12

every water bill paid in England, it is clear that well-targeted social tariffs can benefit

everyone if they help minimise the number of those who can’t pay (rather than won’t pay)

their water bill.

The government should publish a national policy on social tariffs to set out:

who should get water at a price below the norm for their area; how much lower should the

price be, and; how it should be paid for (who pays).

Transitional tariffs to help people move to the new charging system

Since some will feel the impact of switching to a metered supply more than others it is

essential that the transition from unmetered to metered bill is as smooth as possible.

Research shows that customers really welcome being told what their metered bill will be

before they have to pay it so that they can budget and adjust their water use if they need

to.

Southern Water has employed a transition tariff for this reason. Soon after a meter is

installed information detailing specific water use and potential future consumption and costs

are communicated clearly via a letter to the customer. This gives the customer choices,

alerts them to a possible leak and allows them to take measures to reduce water waste and

thereby reduce their bill and to be prepared for future bills. Upon receipt of this first

communication all Southern Water customers have the option to switch to the transition tariff

which is spread over a three-year period in order to ease the move from a bill based on

rateable values to one based on a measured supply. As well as a transitional tariff, excellent

customer service from the water company and easy-to-understand feedback on household

consumption is vital during the transition. South East Water has also developed a transitional

tariff to support its metering programme.

Rising block tariffs to provide incentives for water efficiency

Any of us not on a meter could be paying for someone else’s wasteful use of water. A water-

efficient and a water-greedy neighbour in similar-sized properties without water meters will

pay exactly the same water bill. This isn’t fair, and it doesn’t make sense. While the average

person in the UK uses 150 litres of water every day, water company records show that some

people use over 5 times that amount

, which - without meters - everyone is paying for. It is

likely that there are very significant cross-subsidies between ‘low’ water users and ‘high’

water users at peak times (in some areas water company investment in new resources is

driven by a need to meet peak water demand, which means that households that use a lot of

water at peak time are pushing up water bills for everyone).

Some kind of rising block tariff - where basic (essential) usage is charged at a low cost with

the unit cost escalating rapidly thereafter - is key to encourage less wasteful use of water

and deliver affordable water efficiency. Rising block tariffs can be developed without

household occupancy data (for example through benchmarks set on household consumption

with a high threshold between the first and second blocks) – and can be accompanied by a

concessionary scheme (for example for households who can show that they have a high

number of occupants) and a social tariff to ensure that low-income households are not

penalised.

To maximise the impact of water efficiency, rising block tariffs should be linked

to water scarcity, so that higher charges are incurred when and where water is scarce.

Fairness on Tap: making the case for metering 13

STEP 3: HELP TO SAVE WATER AND CUT BILLS

Alongside a commitment to metering and a fairer tariff system, the Fairness on Tap coalition

is calling for government strategy to ensure that households get the advice, information,

equipment and support they need to save water. Water-efficient kit can be easily installed in

homes to reduce water consumption and help reduce water bills – but this kit must be easier

to source, identify and install.

While paying for what we use gives an incentive to reduce waste, households must also be

provided with an easy, convenient means to do so, along with information so that they can

take control of their use and bills. To realise the full potential for water efficiency, metering

must be part of a package which also includes advice to householders on how they can

reduce water (and energy) wastage and practical help, such as a water efficiency retrofit at

no additional cost and products to make taps, toilets and showers water-efficient. In

combination these can deliver greater water savings, and reduce day-to-day water waste,

while protecting essential use.

The average person uses 150 litres of water a day.

There is a government aspiration to

reduce this to 130 litres per person per day by 2030.

The Blueprint for Water Coalition calls

for a 20% cut, to around 120 litres.

For many households, this should be achievable.

Waterwise’s ‘Evidence Base for Large-scale Water Efficiency in Homes’ shows that a £30

investment on water efficiency kit - a water efficient showerhead, toilet device and tap inserts

– can yield a saving of 41 litres per property per day and could save more than £40 per year

on combined household metered water and energy bills.

However, to realise savings

customers need to be provided with information and incentives to make water-efficient

choices, advice about devices suitable for their appliances and help to install them and make

behavioural savings. It is essential that water efficiency is at the heart of water regulation, to

encourage and enable water companies to deliver the water efficiency support needed. More

widespread availability and better labelling of water efficient white goods would give also

customers the chance to make informed purchasing choices leading to significant water and

financial savings.

Waterwise’s ‘Evidence Base’ presents robust evidence that water efficiency retrofitting is

most effective when implemented alongside a meter installation programme. For example, in

2008 Anglian Water carried out a joint meter installation and water efficiency retrofitting in

Ipswich. This resulted in savings of 41 litres per property per day across 1000 homes –

significantly higher than water efficiency retrofit projects carried out a significant period of

time after meters have been installed (which yielded water savings of 29 litres per property

per day). In addition, combining the delivery of water efficiency with a metering programme

can reduce the cost of retrofitting water-efficient devices to toilets, taps and showers to £40

per property.

Fairness on Tap: making the case for metering 14

Frequently Asked Questions

Some people’s bills are going to go up on installation of a water meter, particularly

large families who live in low rateable value homes. Some of these people will be on

low incomes. How do we protect them?

Firstly, whenever a meter is installed the household should always be offered water

efficiency advice, a water audit and a water efficiency kit to reduce water waste. This in itself

will reduce the water bill (and help reduce the energy bill too).

By passing on clear information to customers about their water consumption soon after their

meter is installed and giving them predictions regarding the level of future bills based on this

level of consumption, water companies can ensure householders are not only prepared for

future charges but can take steps to address water wastage. In addition, the transition to

paying a water bill based on a fully metered charge can be made easier by offering a

transitional (change-over) tariff. This can help deal with the affordability concerns of many.

However, there are some for whom the water bill will still represent an unrealistic proportion

of their household income. It is of the utmost importance to clearly identify those groups who

need help with their water bills and to develop social tariffs to help them.

These are ways to address the issue of affordability in today’s water bills. Ultimately, by

using water more efficiently, we will reduce the need for the development of new reservoirs,

desalination plants and other capital-intensive new resources in order to meet future

demand. In the longer term, this will benefit customers since potential costs can be avoided.

One thing that can happen when a meter is installed is a leak is revealed. Will the

customer have to find the money to pay for the leaked water and for fixing the leak?

One quarter of water lost through leaks occurs within the boundary of a property. A meter

can help identify these leaks – a huge opportunity to save a lot of water. The Walker Review

suggested that metered charging can result in reduced customer supply pipe leakage of

around 10 litres per person per day.

Water companies generally have some form of help available to customers when a leak is

revealed. For example South West Water offers £100 towards the cost of fixing a leak on a

household’s service pipe and a leakage allowance towards the cost of the water clocked up

on the meter as a result of the leak – both depending on the household fixing the leak is

fixed within a set time. Other companies will repair the leak for free, such as Anglian Water

under its ‘Watertight Promise’.

However, at present, customer care varies significantly across England. During the course of

this research, customers at a number of water companies have told us about situations

being very badly handled by customer service representatives, causing worry and stress for

householders. It is essential that customers receive clear, consistent, helpful and

sympathetic advice under circumstances where a high metered water bill reveals a leak

within a householders’ property. At the moment this is not the universal experience.

Removing leaks from the system will ultimately save customers money but it is vital that

there are mechanisms in place to help the customer at the time a leak is discovered.

Fairness on Tap: making the case for metering 15

Customers should never be alerted to a leak in the first instance in the form of a worryingly

high bill - a system should be implemented as part of a strategic approach to metering so

that this never comes to pass. Such a system should include:

 ‘Smart’ meters that record real-time consumption and frequent meter readings to alert

water companies to potential leaks;

 Support at the time of meter installation showing customers how to check for leaks

themselves;

 Warning letters or other customer engagement targeted at ‘high’ water-using

households who may have leaks;

 Devices to help customers regularly read their meters;

 Leak alarms within the home, to alert customers to leaks;

 Information for customers about the level of their metered bill before they have to pay it;

 A transitional tariff so that newly metered customers can identify and fix leaks before

moving to a completely metered bill, and;

 Water company assistance to help customers fix leaks when they have been identified.

Should water metering be rolled out only in those areas where the cost benefit case

can be made for it?

The Walker Review estimated the costs of installing an ‘optant’ meter as about £220 per

household. When combined with the additional ongoing costs of metered billing, the total

cost is around £30 per year per household (although some of these costs may reduce over

time). With systematic (compulsory) metering, average installation costs would fall to

between £110 and £175 per property; assuming the same ongoing costs as with the optant

approach, this translates into an annual average cost of between £22 and £26 per

household.

However, the cost of systematic metering as estimated by the Walker Review

is significantly above the costs reported by some water companies.

In addition, many

companies anticipate savings in on-going costs for systematic metering, as opposed to an

optant approach - for example, savings around meter reading and billing for a metered

charging system, compared to running a mixed system (optant metered and rateable value).

The Walker Review estimated the benefits of metering to include:

 Reduced consumption of about 15 litres per person per day (13 cubic metres per

household per year) on average; and

 Reduced customer supply leakage of around 10 litres per person per day (9 cubic

metres per household per year).

The Walker Review concluded that benefits would outweigh costs where water is scarce.

While cost-benefit analysis is useful, for it to have real meaning it is essential that the true

costs and benefits of metering are factored in and an agreed methodology established. The

environmental and social costs and benefits of taking more water from the environment need

to be better accounted for (for example using an environmental shadow price).

According

to the ‘Blueprint for Water’: “current definitions of water scarcity reflect current water

resources issues without assessing vulnerability to future issues or to the value and

vulnerability of the water environment”.

The cost-benefit case should also be set within a

longer time frame to anticipate future resource issues. Using water more efficiently helps

avoid the need for costly capital investment in new water resource developments to meet

growing demand - keeping down everyone’s bills.

Fairness on Tap: making the case for metering 16

What is actually best for the customer, long term, should also be considered. The water we

use in our homes costs us on average less than £1 a day - significantly less than we pay for

other utilities such as gas and electricity. The value of water in future will be higher than it is

today as upward cost pressures increase as a result of climate change and population

growth (and supply systems being designed to cope with peak rather than average demand)

as well as the replacement of ageing assets. Yet this future scarcity and its likely impact

aren’t always fully reflected in the current assessment of costs and benefits.

The current opt-in approach to metering is an expensive route to take. Those opting to have

a meter early on - usually those who think they will benefit from having a meter - will likely

reap those benefits. However, those remaining on an unmeasured bill will see bill increases

far greater than those on meters. By failing to switch at the right time, potential winners on

meters will not only fail to make savings, they will also end up paying larger bills. The fact is

that - whatever the region - even if water is currently plentiful, there will be those who will win

from switching to meters and, as those people switch, so the next lot of customers will

benefit from switching. The optant approach will ultimately lead to universal metering given

enough time, but this would not be the best value approach for customers: it would cost

more overall than a more strategic approach to higher levels of metering. Finally, there are

benefits in terms of messaging and communications moving everyone to meters as part of a

national strategy.

If we agree that a social tariff should be mandated and funded through water bills,

aren’t we just going to end up with people on low incomes funding help for those on

lower incomes?

The key to developing a social tariff is to have access to the right information to target it

effectively. Information on water consumption provided by a water meter is the first step.

Water companies can use this along with local information on household income to

proactively target assistance at households with a higher likelihood of need, as well as well

as having assistance available on request. If the current level of help funded through

customer bills under the rateable value system was transferred to a new charging system -

but targeted at those actually needing help and funded by those who didn’t - a far more

effective system of help would be created.

The water companies are telling us to be more efficient with water but what about

putting their own houses in order first? Loads of water leaks from their pipes!

Just under a quarter (22%) of all water put into public supply is lost through leaks.

Water

Companies are set annual leakage targets by the regulator Ofwat at the ‘sustainable

economic level of leakage’. Despite progress made by the water companies in bringing down

leakage over the last 14 years, in 2010 six companies failed to meet their leakage targets.

This was largely attributed to the cold weather and frozen pipes at the end of the year. There

are financial penalties for failing to meet targets to be paid out of company’ pockets.

Fixing leaks costs money. However, it is essential that companies continue to strive to meet

targets and exceed them where there is an economic case to do so (as part of the Water

Resource Planning options assessment). According to WWF: “while some companies

include future levels of leakage as one of the options [in Water Resource Planning], others

Fairness on Tap: making the case for metering 17

pre-determine their ‘economic level of leakage’ and do not consider [leakage reduction] as

an option to meet the supply and demand balance. This may result in leakage not being

reduced, even when it might be the cheapest option to address a supply-demand shortfall.

We recommend that...leakage over and above the ‘economic level of leakage’ [should be]

pursued where this is the most cost-beneficial approach to meeting demand.”

Since a third of leakage occurs within the boundaries of a customers’ property (in the home

or in supply pipes), meters play a role in reducing overall leakage. For example, Southern

Water estimates that its metering programme will help reduce leakage to below 13%.

Won’t water companies hike up the price of water once we’ve all moved to a meter?

The regulator Ofwat sets prices for the water companies so that they can recover acceptable

costs and make a reasonable profit for shareholders. It is their job to ensure that water

prices are kept in check and this applies for metered charges as it does for unmetered bills.

What type of meter should be installed?

The majority of the 10 million or so meters already in place are ‘dumb’ meters - they clock up

water use as water passes over a mechanism and need to be read manually. They don’t

store information so each meter read is a ‘snap shot’ of cumulative consumption taken on a

particular day. In contrast ‘smart’ AMR (automated meter reading) meters record time-series

data, allowing water companies and customers to monitor daily consumption over a period

using data obtained from a single meter reading. This allows better detection of leaks and a

better understanding of water use, which is essential to develop a sophisticated package of

tariffs and targeted water efficiency support. Smart meters are also compatible with in-home

display devices, to help customers understand and respond to their water consumption.

There are potentially huge advantages in linking water metering installation to the roll out of

smart energy metering, which the government is planning to deliver by 2020. A strategy to

install smart water meters on a similar timescale would help collaboration between water and

energy companies and offer opportunities for huge savings through combined delivery.

Why do we need to save water?

Current water consumption is not within sustainable limits: one third of our river catchments

are at risk of damage from water abstraction, a problem which is set to get worse with

climate change and rising population.

Water is likely to become an increasingly scarce

resource, while demand is likely to grow, so there is a need to cut demand now so we are

best placed to cope in future.

Using water more efficiently also has spin-off benefits for

household energy consumption. About a third of the average UK gas bill goes on heating

water for washing dishes and clothes, bathing, showering and cleaning – about £200 a

year.

Heating water in homes for cooking, personal washing and cleaning produces 5% of

the UK’s greenhouse gas emissions and a quarter of CO

emissions from homes – it is the

second biggest use of energy in homes, after space heating, and before gadgets and

appliances.

Wasting less hot water in homes – through more efficient fixtures and fittings

and more efficient use of hot water from taps and showers – can immediately impact on

carbon targets.

Fairness on Tap: making the case for metering 18

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Final Report to Defra. pp71.

Walker, A. 2009. The Independent Review of Charging for Household Water and Sewage Services.

Final Report to Defra. pp115.

Walker, A. 2009. The Independent Review of Charging for Household Water and Sewage Services.

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2011].

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on the environmental issues of unsustainable abstraction.

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Fairness on Tap: making the case for metering 19

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The Fairness on Tap coalition is calling for a fair deal for water – for

customers and the environment. We believe government should set

out a strategy to install water meters in at least the 80% of England

where there is greatest pressure on the freshwater environment and

people’s pockets by 2020. This must be supported by fair tariffs to

make water bills affordable for everyone and help to reduce water

waste and protect the freshwater environment.

For more information go to www.fairnessontap.org.uk