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War. Sci. Tech. Vol. 37, No.8, pp. 1-7,1998.© 1998 IAWQ. Published by Elsevier Science Ltd

Printed in Great Britain.0273-1223/98 $19'00 + 0'00

SOCIO ECONOMIC INFLUENCES ON THERESTORATION AND MAINTENANCE OFTHE WATER ENVIRONMENT

Peter Matthews

Anglian Water, Anglian House, Ambury Road, Huntingdon, Cambridge PE18 6NZ,UK

ABSTRACT

Protection of the water environment has become a modern socio economic issue in which the sociologicalpressures for a healthy water environment must be balanced with affordability. Reconciliation of theseaspects requires clear political thinking and rigorous methodologies. It also requires a shift in mind-set whichconsiders members of the public as customers.

Water utilities are the major users of the water environment and potentially its greatest threat - so gooddelivery of water services is very important. The presentation addresses the topic through the experience ofAnglian Water, a privatised water utility serving Eastern England. © 1998 IAWQ. Published by ElsevierScience Ltd

KEYWORDS

Socio economics; water management; utility services.

INTRODUCTION

This article was not prepared from the view point of an expert economist or sociologist or even a socio­economist. It is not presented by an author with experience of politics but it is presented by someone withoperational experience of the implications of these social forces.

Socio-economics and politics have been major shaping influences on water management throughout theworld in the last 20 years and have transformed water utility services. It is the experience of this changewhich underpins the paper.

These experiences are drawn from the journey of transformation in the service and role of Anglian Water.This Anglo Scandinavian international group has a number of subsidiaries; the largest, Anglian WaterServices, provides water and sewage utility services to Eastern England. This had its origins in 1974. Over200 water and sewage departments, mostly of municipal authorities, and river authorities were combinedinto one Water Authority based on river catchments. Nine other similar Authorities were formed in Englandand Wales.

In 1989 the utility functions of Anglian Water were separated from the environmental water functions. Theutility functions were privatised and this has now metamorphised into a global company. The environmentalwater functions of all regions were combined nationally into the National Rivers Authority, now subsumed

2 P.MATIHEWS

into the Environment Agency. The economic and customer activities of all Water Service Companies inEngland and Wales are regulated by the Office of Water Services (OFWAT).

The Companies operate under the terms of a 25 year licence which defines levels of service and agreesinvestment programmes. In 1989 a 10 year agreement on capital investment, operation costs, efficienciesand charges was agreed with a review after 5 years in 1994/5. The financial regime agreed for 1995-2000 iseven more demanding.

The new commercial and customer focus of privatised companies stimulated and needed significant culturalchange. In late 1994, Anglian Water Services took a further step in its transformation by introducing aprocess driven organisation which uses empowerment, total quality and learning as a means of improvingservice whilst cutting cost. It keeps technology, organisation and employee needs in balance to giveoptimum customer service. Knowledge management is a key to the success of the organisation; in 1994 italso launched itself as a learning organisation but by 1996 this had evolved into Aqua Universitas - theUniversity of Water. Its mission is to create and spread knowledge for sustainable water management.

These changes have responded to social and economic pressures for improvements to the water environmentand the concerns for the consequent rises in costs to water consumers. Massive changes in investment and inthe services provided could not have been achieved without massive changes in the organisationsresponsible for water management. Before examining this in more detail in the case of Anglian Water it isworth looking at the cycle of politics, social needs and economics. Environmental water management is agood example and Figure I describes the relationships.

ENVIRONMENTAL WATER MANAGEMENT

Figure I. The cycle of politics, environment and economics.

Let us start at the perceived need for improvement of rivers. For example an incident in a polluted riveroccurs - perhaps it is an overpowering smell in a hot summer or a child dies of disease after falling in a river(not necessarily connected events) or a university research programme bidding for funds highlights problemswith water quality. Whatever the reason, the media seizes hold of the story and may exaggerate the problem.Politicians seize on the opportunity and demand action, particularly if they are in opposition in a democracy.Such demands often ignore practical or economic considerations but address moral and emotional issues.These complex webs of relationships will be complicated by environmental pressure groups who may begenuinely concerned about a particular problem or may be exploiting that situation to pursue a wider agendaof interests. These observations do not pass judgement in the rights or ways of these roles but recordpractical observation of the social and political forces at work. However there is a need at the outset toseparate fact from perception.

It is never as elear cut as this as there are usually responsible authorities seeking to manage and improve thesituation. Their success may be constrained by resources - reflecting the availability of money. However,they may be the target of criticism for inaction. Such authorities may be regulatory bodies or dischargers.

The quality of the river water may be assessed from chemical or biological monitoring and classified. Themonitoring data may be used to assess current water quality against ideal targets. Such assessments caninvolve statistical techniques and form the basis for action or investment plans. Publication of monitoring

Restoration and maintenance of the water environment 3

reports can create even more demand for action when the public, media and politicians appreciate theshortfalls in quality.

The call for action falls on the principal dischargers. Once again the technologists need to relate therequirements for effluent improvement to the needs of the river. The relationship has to be sufficientlysimple to administer, be understandable by the dischargers, credible to the public but not waste money.Therein lies the debate between the approach of uniform emission standards and local emission standardsbased on environmental quality standards and objectives. Sociological forces may obscure logic in thesedebates and portray policies in opposing ways. Uniform standards may be described as a potential waste ofmoney or as an expression of the precautionary principle - "if in doubt don't". Local emission standards maybe portrayed as a licence to pollute or achieving environmental goals at least cost.

Once again the perceptions of compliance by dischargers are crucial. Legal constraints on the discharges areusually expressed in a licence. Failure to meet the terms of the licence incurs penalties, but a big pressure inan open democracy can be the threat of exposure of polluters in the media - say as one of a dirty dozen! Socompliance is a very big socio-economic issue.

The bigger the threat to the discharger the more he or she will want to avoid risks and hence the less riskythe design of effluent control systems. Innovative technology is discouraged and massive safety factors arebuilt into process design. This incurs extra cost.

In the case of water utility services, this means that the cost of providing those services rises and customersexperience increased water charges. At this point there will be an outcry against rising charges. The sameproblem arises with the media and politicians who demand environmental improvements and also demandlower charges. They think in parallel and find it difficult to make the cross connections. The debate is almostschizophrenic see-sawing between the twin poles of the debate.

In a regional charging system the customer charges are usually equalised. Most customers accept thispremise - for example, most people recognise that a good water quality river is a regional asset or even anational asset and not just for the benefit of immediate users. Nevertheless the pressure groups are oftenriver users such as anglers and most customers are content to leave them to lead the public demand forimprovement. However, as charges rise so the chances of individual customers complaining increases. Theymay take the attitude that they did not demand the improvement incurring cost so why should they pay? Theissue of greater good versus personal need plays a role. No-one condones sewer flooding - it is awful - yet ina survey in Anglian Water it was identified as a low priority in overall terms for investment because so fewpeople experience this problem, but where and when it is experienced there is a local demand for immediateaction.

Other aspects of water will be subject to similar cycles of action and reaction.

THE EMERGENCE OF A BETTER UNDERSTANDING OF THE IMPACTOF THE COSTS OF RESTORATION AND MAINTENANCE

The paradox of the impact of the investment demonstrated in Figure I is that as far as individuals in thecommunity are concerned the cycle is only evident for municipal water management. There is little realunderstanding about the effect of the rising municipal service charges and waste management inmanufacturing industry.

If thc pricc of petrol or baked beans rises because of the requirements of the restoration and maintenance ofcnvironmental water this is not evident to consumers. If municipal taxes rise then the cost is more evidentand, of course, separate water charges for the municipal services themselves are very clear to consumers. So,whilst the effects on competitiveness will be more difficult for industry, the cost service relationship is moredifficult for water utility services. The difference is that for manufacturing industry, restoration andmaintenance of water quality is secondary to their purpose, but for water utilities it is their primary purpose.

4 P.MATIHEWS

Hence the socio economic relationships have become much more evident and important for watelmanagement. Water regulators are required to take into account the cost implications of environnregulation proposals and this was required in the EU under the Treaty of Maastricht.

This is clearly seen in the Commission Proposal for a Directive Establishing a Framework for EuropeaLCommunity Water Policy published for consultation in December 1996 (a proposal was publishedsubsequently in February 1997). However the Commission baulked at attempting to quantify the costs of theProposal because of the difficulties in doing so at a European level, but recognised that it may be possible todo more substantial analysis at Member State level. River Basin authorities are to be established andamongst many responsibilities they will have to complete economic analysis of water use within River BasinDistricts. They will play a role in determining charges for the use of water. The monitoring programmesconducted by the Authorities will reveal necessary action for the physical restoration work for surface watersand for the improvement in replenishment of groundwaters.

Whilst the details of the proposals are not universally accepted because of the extension of the Proposal intothe nature of administrative organisation, the economic dimension to the proposals is welcomed.

Techniques for doing cost benefit analysis are becoming available, for example the Foundation for WaterResearch (FWR) in the UK has produced a Manual for assessing the benefits of surface water qualityimprovements.

WHO ARE THE STAKEHOLDERS WHO INFLUENCE EVENTS?

The sociopolitico relationships for the delivery of water utility service can be shown in a bipyramidaloctahedron (Figure 2).

.Regulators

Media PoUticians

Figure 2. Socio-political relationships in water management.

There are other relationships which underpin this model. So for example regulators will include nationalbodies as well as the European Commission in EU countries. Utilities will have shareholders where they arecompanies with equity. However the model does prOVide a useful tool to analyse relationships.

For example in the face of media - customers and regulators· the media may sensationalise water qualitysituations and force regulators to take action for restoration and maintenance. Some individuals encouragethe media to behave in this way for a variety of personal reasons. This may be for the good but it can lead toover reaction and distortion of priorities for investment. It needs level headed management.

The external faces and internal sections may be used to provide a useful systematic analysis of relationships.

Restoration and maintenance of the water environment

MANAGEMENT OF MARINE DISCHARGES AS AN EXAMPLE

5

The restoration and maintenance of coastal water quality has been a significant European issue for sometime. The scientific evidence shows that if fine screened sewage is discharged via long outfalls which aredesigned after extensive modelling to meet use quality criteria it can be a cost effective solution for coastalsewage disposal. However there has been an underlying public unease about the practice. This unease hasbeen fuelled partly by the general aversion to anything to do with sewage and partly by past inadequateoutfalls which released raw unscreened sewage into bathing waters causing bathers to swim amongst faeces.Whatever the risks, this practice was bound to lead to change.

Public and political action groups have combined forces and used the media to force changes in governmentpolicies in the UK, mirroring similar changes throughout the world, but the costs have risen. It may be thatthe momentum of this pressure will carryon still further and there are signs that there may be a trendtowards disinfection to protect recreational use of sea water and nutrient removal in selected areas in order toreduce eutrophication with consequent marine algal growth (and degradation of coral reefs in other parts ofthe world). In these cases there is concern about the nature of the treatment processes used, so chemicaldisinfection is increasingly unpopular because of concerns about the impact of the chemicals and reactionby-products.

The number of bathing waters identified under the EC Directive in the UK in the early 1980's was small. Forexample none were identified in Eastern England but as a result of pressure the number rose in the mid1980's and there are now (38) in the Anglian region.

This placed pressure on the then water authorities to invest considerable sums of money and this needcontributed to the government decision to privatise the water utility functions and separate environmentalwater regulation.

This was still not enough, and only a short while after privatisation the requirements changed to providetreatment in anticipation of the EC Urban Waste Water Treatment Directive. The early UK policy decisionand the EC Directive itself reflected the sociological pressures.

LESSONS FOR THE FUTURE

Anglian Water's experience is that effective control of industrial waste water discharged to sewers and ofeffective management of the treatment of municipal sewage is a major contributing factor in restoring andmaintaining river water quality. Figure 3 shows the correlations between the reduction of BOD loadsdischarged in sewage effluents and investment in sewage treatment improvements in raw water quality overrecent years. This has required significant increases in capital investment and operating expenditure with theconsequent rise in charges. So what are the lessons?

We must carry customers with us.We must show tangible benefits to customers.There must be sensible mature debate about the environmental and economics issues; eco-centricityshould not become eco-eccentricity.Those "unable to pay" reasonable water charges should be dealt with as a social issue and should notplace a burden on other customers.The introduction of private sector approaches has produced a more efficient delivery of service thanpublic sector approaches. This is not an indictment of the people involved so they have been theenablers for the transition to take place. It is the freedom to do the right thing which has been thekey. Such freedom has to be matched by political and media maturity which is not always the case.The role of a utility in formulating standards and improvement programmes must be to provideexpert input on the practical and economic implications of proposals but once the will of the peoplehas been expressed then the utility has a responsibility to do the job to its most efficient ability. Thisrequires mature social partnership because if the programmes turn out to be more expensive than the

6 P.MAITHEWS

community at large expected or possibly as large as the utility warned, the utility should not beblamed.The best way forward is to have clear objectives with time scales of achievement. If the objectiveshave a logical scientific basis it is the time scales which should be adjusted and not the objectives. Ofco~rse there may be a series of milestone objectives building towards the ultimate goal, each withassociated timescales.Life cycle analysis of projects is more effective than decisions based on capital investment oroperational costs alone.If customer satisfaction, employees satisfaction, good organisation and appropriate technology arekept together in tetrahedral balance, maybe the complexity of the octahedron described earlierbecomes redundant.Much of the presentation has focused on the challenges in the relationships because this taxes ouringenuity and consumes time. The experiences of Anglian Water are that privatisation with all of thecritical attention focused on it has been a great success. Water supplies, sewage effluents,environmental water and environmental practices are the best ever and excellent in absolute terms.The company is focused on customer services and customers are now understanding this. A recentsurvey showed that over 80% of Anglian Water's customers are satisfied with services. This stillmeans that service or perhaps communication about the service can be improved further for manymore people so there is no room for complacency.Whilst charges have risen steadily they have not risen as much as they would have done as a publicauthority.Perhaps the best way of describing the Company is a good practical example ofa stakeholderCompany providing added value profits. A true Commonwealth of Enterprise.

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Figure 3. (a) River quality improvements in Anglian region 1990-95 compared with Anglian water investment insewage treatment. (b) Length of 'good' (class A) river quality compared with Anglian water capital expenditure on

sewage treatment. overleaf(c) River quality improvement in the Anglian region against BOD and ammoniaremoval from Anglian water STW's. (d) Reduction in BOD load discharged by Anglian water STW's compared

with capital expenditure over 1991-95.

Restoration and maintenance of the water environment 7

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ACKNOWLEDGEMENTS

The author acknowledges the permission of Anglian Water to present the paper. Any views expressed arethose of the author and not necessarily those of Anglian Water.

BmLIOGRAPHY

Anglian Water (1990-1996). Annual Reports and Accounts, Huntingdon, UK.Anglian Water (1993). An Outlook on Water, Huntingdon, UK.Anglian Water (1995). Our New Dealfor Customers, Huntingdon, UK.Commission of European Community (1996). Communication from the Commission to the Council and the European Parliament

COM (96) 59 Final.DoEIWO (1993). Water Charges, The Quality Framework, London, UK.DoEIWO (1996). Water. Increasing Customer Choice, London, UK.Edwards, K.. and Martin, L. (1995). A Methodology for surveying domestic water consumption. J. Inst. Wat. Environ. MaTUlg. 9,

477-488.OFWAT (1992). The Cost of Quality, Birmingham, UK.OFWAT (1993). Paying for Quality, The Political Perspective, Birmingham, UK.OFWAT (1994). Future Charges for Water and Sewerage Services, Birmingham, UK.OFWAT (1996). The Regulation of Common Carriage Agreements in England and Wales, Birmingham, UK.Schroders (1989). Prospectus, The Water Share Offers, London, UK.Stockholm Water Symposium (1996). Safeguarding Water Resources for Tomorrow, Papers and discussions. Stockholm Water,

Stockholm, Sweden.European Commission (1996). Proposal for a community directive establishing a framework for european water policy, Draft 4

December.Foundation for Water Research (1996). Manual for assessing the Benefits of Surface Water Quality, December, Marlow, UK.