Environmental Law News Update

In this latest Environmental Law News Update, Christopher Badger and Charles Morgan consider the recent fine imposed on Yorkshire Water for sewage pollution, an Environment Agency report into the water and sewage performance of companies, and the OFWAT consultation on the 2019 water industry price review.

Yorkshire Water fined £600,000

Yorkshire Water have been fined £600,000 for polluting a Staithes watercourse with sewage that had leaked out of a poorly-maintained storage tank.

The sludge storage tank was rusty and had holes in, leading to sludge escaping into a yard before making its way into a small ditch below the sewage works and into the Dales Beck. The sludge was not immediately cleaned up from the yard because the company believed that the sludge was contained on site and would be re-circulated back into the treatment process. The fact that the company’s own site manual stated that the site drainage was not sealed was not picked up by the company.

To compound matters, the company failed to respond in August to a request from the EA for a plan for how it was going to clean up and was still cleaning sewage sludge from the water three months after the incident.

The Judge found that the company had been reckless, rather than negligent. The court was referred to a significant impact, including dead fish and poor water quality, implying that the EA at least suggested that this was a category 2 incident.

In the event that this was a sentence for a reckless category 2 offence, the fine of £600,000 actually appears extremely low. Yorkshire Water’s turnover for the year ending 31 March 2017 was approximately £1 billion, with an operating profit before exceptional items and tax of £317 million (although the company actually made a loss for the financial year). In contrast, Thames Water were fined £9 million and £8 million in respect of two reckless category 2 offences (part of a larger total fine of £20 million imposed in March of this year, see previous news update here.

A link to the EA’s press release can be found here.

EA report on water and sewerage companies’ performance published

The EA published its most recent report on the environmental performance of the 9 water and sewerage companies operating wholly or mainly in England on 12 July.

Key points that were highlighted include:

• There was a slight reduction in the number of serious pollution incidents (categories 1 and 2) to 57 compared to 59 in 2015, 61 in 2014 and 88 in 2013;
• There was a rise in the most serious category 1 incidents to 9, all associated with sewerage, after 2 record low years when there were only 4 per year;
• There was an increase in the total number of pollution incidents ranked category 1 to 3 at 1902 compared to 1742 in 2015, the first rise in incidents since 2012.

All water companies have been asked to review and update their pollution incident reduction action plans.

Unsurprisingly, fines received by water companies increased from £2,494,500 in 2015 to £6,560,000 in 2016, yet the number of prosecutions only increased from 9 to 10. The number of formal cautions dropped from 25 in 2015 to 11 in 2016 and the number of Enforcement Undertakings increased from 0 in 2015 to 4 in 2016. This included £375,000 paid by Northumbrian Water as part of an Enforcement Undertaking offered for pollution from a pumping station in 2015 and 2016.

The EA has published these reports since 2011 and ranks the companies using a star rating system. United Utilities and Wessex Water both received 4 stars, indicating that the EA considers them ‘Industry Leading’. Northumbrian Water, South West Water and Thames Water each received 2 stars, indicating that the EA considers all 3 ‘Require Improvement’.

The full report can be found here

OFWAT consult on 2019 water industry price review

The Water Services Regulation Authority (aka OFWAT) has published a 282 page consultation document (‘Delivering Water 2020‘) on the methodology which it proposes to adopt in 2019 for the sixth quinquennial price review process since the privatisation of the water industry in 1989 (‘PR19’). The process will fix prices for water and sewerage services from 2020 – 2025. It focuses on four key themes:

• great customer service (sic)
• resilience
• affordable bills
• innovation

To use OFWAT’s own choice of adjective and a Biblical cue, the greatest of these is ‘resilience’. This word and its derivatives occur precisely 300 times in the document, prompted by OFWAT’s ‘primary duty’ under section 22 of the Water Act 2014 (amending section 2 of the Water Industry Act 1991) to further the ‘resilience objective’ as there defined i.e.:

(a) to secure the long-term resilience of water undertakers’ supply systems and sewerage undertakers’ sewerage systems as regards environmental pressures, population growth and changes in consumer behaviour, and

(b) to secure that undertakers take steps for the purpose of enabling them to meet, in the long term, the need for the supply of water and the provision of sewerage services to consumers.

On this score OFWAT proposes ‘to hold companies to account’ in a manner which goes beyond simple compliance with their own statutory obligations.

Another new dynamic is the entry into the retail business market on 1 April 2017 of water supply licensees and sewerage licensees licensed under Chapter 1 of Part 1 of the Water Act 2014. To date, OFWAT has granted 25 Water Supply and/or Sewerage Licences (‘WSSL’) under this new régime, including those to companies owned by some of the undertakers previously appointed under the Water Industry Act 1991. These licensees are not subject to individual price control by OFWAT (which grants licences as agent of the Secretary of State) but their existence will inform the methodology of PR19 in some respects. In particular OFWAT is consulting upon what form of price regulation should apply to those undertakers which have not exited the business retail market and may thus be in competition with licensees.

The full document can be found here