FIFTH MEETING OF THE NORTHUMBRIAN WATER FORUM 25 MARCH 2013, DURHAM COUNTY CRICKET CLUB FINAL MEETING NOTES

PRESENT: Independent Chair: Andrea Cook For Consumer Council for Water (CCWater): Barbara Leech For Environment Agency (EA): Leonore Frear For Natural England (NE): Adrian Vass For Association of North East Councils (ANEC): Melanie Laws For NHS North of Tyne: Mary Coyle For North East Chamber of Commerce (NECC): James Ramsbotham (part) For Northumbrian Water (NWL) Heidi Mottram, Graham Neave, Ceri Jones, Ken Oswald, Ros Shedden and Lucy Denham Independent Assurance Advisor: Ben Haywood Smith APOLOGIES: For Drinking Water Inspectorate (DWI): Jacqueline Atkinson For Confederation of British Industry (CBI): Sarah Green For Environment Agency (EA): Ian Hodge For Youth Advice Service and Citizens Advice Bureau (YAS and CAB): Jon Johannsson and Janine Brown

NOTES AND ACTIONS 1. Welcome, Introduction of new members and apologies Andrea Cook (AC) welcomed everyone to the fifth meeting of the Northumbrian Water Forum (the Forum). AC welcomed the new representative for NE, Adrian Vass, and also noted that Jacqueline Atkinson would now represent the DWI on the Forum. AC also noted that Janine Brown would be the main contact for CAB. AC thanked Milo Purcell, the outgoing DWI member, Ruth Bull, the outgoing NE member and Jon Johannsson, the outgoing CAB member, for their thoughtful and useful input during their time on the Forum. AC noted that four independent members, namely Jacqueline Atkinson, Sarah Green, Ian Hodge and Janine Browne had sent their apologies for this meeting. Notes & actions of last meeting held on 28 September 2012 Actions from the last meeting were reviewed. The record in the table at the end of these notes has been updated with progress. Completed actions are shaded these will be deleted as the minutes are prepared for the next meeting. This will be reflected in the notes lodged on the Forum web page.

2.

The following important items were noted: Item 10 Consideration of the role the media has to play the Forum agreed that a media strategy is needed. Melanie Laws agreed to lead on this. Action Forum (ML) Item 20 The induction visit and materials had been extremely useful. The Forum members would also like to visit a water treatment works and the customer contact centre.

Item 28 a graphic showing how all of the customer and stakeholder consultation fits into the process is now in the Members Area. Such graphics are useful but need to have narrative if they are to be used in the public arena. The company said they had started to consider how its PR14 documentation should be published; the Forum felt that the Forum Report to Ofwat and the company submission and related customer publications would benefit from some coordination (note this is about appearance not content). The company will bring the person organising publication of the NWL PR14 documents to a forum meeting. Melanie Laws agreed to be the Forum contact for liaison on publication. Action NWL. Item 31 Ofwat draft methodology Ofwat have not produced any summary documents which would help Forum members. The company will now prepare a key principles document and circulate to forum members. Action NWL. Item 35 key forum challenges are now being captured (also those from previous work have been identified via minutes and notes); a spreadsheet is being kept up to date as we progress. This is now held in the Members Area. Item 37 the need for the Forum members to understand issues around debt and affordability had been identified. The CAB had previously offered to provide anonomised example profiles of how people fall into debt. Also ANAC offered to share research on the impact of welfare reforms. The Forum agreed that this would be very useful and that an item to cover debt should be added to a future agenda. 3. Customer research - willingness to pay

KO said the company have been reflecting on the feedback from Northumbrian Water and Essex & Suffolk Forums. It had carried out CBA sensitivity tests and a further review; it had discussed the outcome (use of lower bound valuations in the CBA) with ICS (assurance provider) which considered that this proposal was an appropriate approach. This proposal had been taken to the Management Team. KO presented the outcome of the review (see slides); the lower bound scenarios more properly represent customers views and protect those in hardship. LF challenged the willingness to pay approach as it relies on customers value and doesnt include value of ecosystem services; LF said she believed that other companies (e.g. Yorkshire) are factoring in these benefits; the company believes this may not be possible with the willingness to pay approach as there will be double counting of benefits. LF said the EA is developing a tool and she would be able to share this. Action Forum (LF). The Forum members and the company were disappointed that proactive prevention of sewer flooding was not found to be cost beneficial. Although customers viewed sewer flooding as a high priority and supported spending large sums on this, the costs of prevention are far higher. Given the high priority and high customer valuation of sewer flooding improvements, KO indicated the company was still considering including sewer flooding enhancements in its business plan, though not at the levels proposed given the CBA outcome. Members thought that working together in partnerships (e.g. EA, NE, Local Government, landowners) on sustainable solutions is the way forward. The new approach to CBA described by KO was referred to as a re-calibration and was endorsed by the Forum members. The approach to enhanced services would be considered again when the full picture was available. 4. Feedback from Ofwat Andrea Cook (AC) described the meeting Ofwat held with the CCG Chairs in March. AC said there was a poor turnout from CCG Chairs generally (about half were standing in for others) although 18 CCGs were represented. Rob Powell, Delivery Director who has only recently joined Ofwat, ran the workshop. Regina Finn stayed for the first twenty minutes of the two and a half hours.

Regina emphasised how important CCGs are and that they are at the heart of the price review process. Ofwat is committed to them as it sees the CCGs as a lever for longer term cultural change on a large scale. She also said it is important for the CCGs to have a good relationship with Ofwat. There was a strong theme of wanting to hold companies to account, including through their Boards. Is the CCG managing to feed through to Board and Board decisions? Ofwat will be asked and asking how do we know the CCGs are independent? Ofwat talked about outcome delivery incentives, including rewards and penalties. There is an expectation that the CCGs will challenge the companies on these, including trade-offs between performance and against different outcomes and provide an assessment to Ofwat about the extent to which these meet customer expectations. Ofwat went on to focus on menu choices; how the menus will work, with the adjustments that will be required against the baseline to provide "truth-telling" incentives. The new and difficult element for the Forum will be its role in the development of the companys outcome delivery incentives and reward and penalties. On menu regulation, the CCGs will be expected to engage with the companies in 2014. There were very few practical examples of what all this might mean; the session was very theoretical and most of the people present were expressing concerns about the timetable and the lack of clarity coming from Ofwat. AC said she challenged very hard on the level of complexity of what was being expected of the CCGs and said it was beyond what the chairs had been led to believe. AC said that Ofwat were planning a joint workshop for companies and CCG chairs in May 2013. BHS said that, subsequent to the workshop, he had been invited to support Yve Buckland, Chair of Essex & Suffolk Water Forum, in a meeting with Rob Powell. At this meeting Rob Powell had acknowledged the push back from the CCGs on the expansion of their role but that Ofwat believed it would be perverse not to involve CCGs in the final stages of the process. Rob Powell confirmed that the primary role of CCGs is around engagement with customers. KO said that there is uncertainty and complexity in the process but that the company would demystify as much as it could. BHS would also be a great asset to the Forum in this aspect. AC said she would keep the members informed on the process, she would be talking to Rob Powell in the following week and would provide feedback. Action AC. National Environmental Programme (see also presentation slides)

5.

Leonore Frear (LF) gave a presentation on the Environment Agencys (EA) expectations for the statutory National Environment Programme (NEP). LF described the EA role, to work with companies to plan environmental improvements. LF said the NEP is a key component of PR14 that sets out actions that companies will need to complete to meet their environmental obligations. NEP Phase 2, released in March 2013, deals with protected areas, Bathing Waters and no deterioration. NEP Phases 3, 4 and 5 will be released in August 2013, December 2013 and January 2016 respectively. LF described NEP Phase 2: Protected areas there are 4 sewage treatment works schemes; there are also 2 schemes to protect drinking water from metaldehyde (a pesticide). Bathing Waters there are 4 schemes for bathing waters to maintain minimum standards; investment to reach good at one of these (subject to Willingness to Pay) and investigations at 10 Bathing Waters. No deterioration LF described this as an absolute requirement of the Water Framework Directive; there are 6 schemes; these are to prevent deterioration due to population growth and treatment deterioration; the schemes will safeguard water quality downstream; there are challenging new limits to meet; the EA is carrying out technical feasibility pilot studies on technologies to reach these standards.

LF described the next steps: Water Resources Management Plan consultation KO said the Water Forum would be consulted on this; AC asked for this to be done by email. Action NWL. Eel Regulations these regulations require water companies to provide safe passage for eels at structures where this may be impeded 11 locations have been identified where the installation of additional screens or eel passes may be required; this is a industry wide issue that has high costs (around 11 million for NWL); Ofwat has asked for a national meeting with the EA about the Eel Regulations. Phase 4 - CJ noted that this will be too late for the PR14 planning process; the company and the EA will need to work closely together so that all involved have the best possible knowledge of what is coming. KO presented the company view of the NEP process and gave more detailed information on the schemes (see presentation). KO said there had been excellent liaison between EA and the company. He said the NEP is only partially developed. KO reported costs so far (excluding the Eel Regulations) are estimated at around 57 million. KO said that the sewage treatment works schemes identified so far are necessary, however two schemes have consent limits that may prove difficult to achieve. AV asked if phosphate issue is from humans or farming? LF said both contributed and EA modelling had estimated the relative impact; she offered to provide more detail. Action EA (LF). Information on further statutory requirements is expected as the year progresses. Possible tighter consent limits may be required in NEP Phase 5. The Forum asked at what point in the process it would be able to challenge the costs. There needed to be challenge around the options and costs of delivering both statutory and discretionary schemes. The company said that external technical auditors are being appointed; the forum would be able to see the report and decide if they wanted to challenge any area. LF stated that with the absolute requirement for no deterioration, there is no CBA. The Forum did not accept this in principle. Forum challenges to the EA included: Absolute requirement for no deterioration the Forum members felt they should challenge where appropriate, especially if cost and benefits are disproportionate. Forum challenge. Growth growth is not certain; it may not happen; or due to Government intervention there may even be more growth. KO said that, with regards to growth, there is good liaison in the area and the company would manage this by investment just in time. Company response. There was also a specific query from the Forum, asking what the company intend to do regarding the beach at Seaton Carew. KO agreed to provide this information. Action NWL. Report to Ofwat AC said that Ofwat, at its workshop, indicated that it was not willing to accept interim chapters or reports for comment or endorsement. BHS described how he had started to draft the report. He was using a series of headings identified from Ofwat literature. The next stage is to get comments from individual members. Action forum members. AC said it is important to capture the Forum value of local knowledge in the report; the report should signpost to Ofwat areas that need their attention and signal areas the Forum have dealt with comprehensively that do not need Ofwat attention. The Forum agreed a protocol for company participation in the developing the report; the Forum is responsible for the content and tone; the company can challenge on facts, e.g. accuracy, and raise any significant issues it sees.

6.

 7.

The Forum members and the company agreed to provide BHS with material, e.g. socio economic context, which will give the report a local base. Action Forum and company. Change in programme - Ofwat has said that business plans and reports will now be submitted the first week in December. Next steps: consideration of PR14 programme and Forum required business

Two papers will be sent out for Forum review; these will be managed by email between meetings, although members are invited to raise any issues at the next meeting as well if they wish: Water Resource Management Plan Water quality plan There have been revisions to Forum meeting dates to take into account the Ofwat change to submission date these will be confirmed to members by email.

SUMMARY OF ACTIONS Description Consideration on the role the media has to play in the process. A media strategy is to be written. Appropriate induction for Forum members to be arranged (including possibly site visit and dinner around the next meeting). Induction took place on 15 January (Washington Sewage Treatment works, Control Room tour and presentations on the business and planning for PR14 Other opportunities to be taken as process progresses (water treatment works and customer centre) Water Forum actions required to fulfil terms of reference - a draft paper is to be produced setting out NWLs views on the key areas it believes the Forum needs to take a view on. This is to be discussed at the October 2012 meeting. th Underway document will be discussed at the December 14 meeting Completed document in Members Area Water quality - comparator data to be provided to the Forum. NWL to contact Milo Purcell Customer and stakeholder consultation overview a graphic to be prepared showing all forms of customer and stakeholder consultation and research and their relationships (PR14 specific and other, e.g. tracking surveys, social tariffs). Completed placed in Members Area Ofwat draft methodology brief to be prepared and circulated to Forum members. Key principles document to be produced Ofwat customer challenge group workshop brief to be prepared and circulated to Forum members. Completed this was covered in the meeting see notes above Independent Forum members to work together to build a process which highlights Forum independence. Completed - the first step is to meet together without the company for before each meeting this has started. Use of Ben Haywood Smith (BHS) how can BHS be used with regards to the Forum carrying out their Terms of Reference. Completed this is an iterative process which has started. Capture of forum challenges and subsequent outcomes this will be an evidence trail to support the writing of the Report to Ofwat Completed this process is now underway documented evidence trail is now in Members Area
th

10

Responsibility Forum (ML)

20

NWL

22

NWL

24

NWL (and MP)

28

NWL

31

NWL

32

ANDREA COOK

33

FORUM

34

ANDREA COOK

35

BEN HAYWOOD SMITH

36

Forum Report to Ofwat consistency NWL with E&S there is a need to coordinate the writing process with Essex & Suffolk Water Forum A teleconference is to be arranged between the Chairs. Bernanrd Crump, new CCWater Chair for Central and Eastern region may attend future Northern meetings to act as a link Need for the Forum members to understand mechanisms of debt anonomised example profiles how people fall into debt to be provided by CAB. Research on impact of welfare reforms to be provided by ANAC. Item to be added to future agenda Stakeholder consultation face to face meetings proposals for the sessions to be provided to Forum members for review Publication of PR14 documents (e.g. Water forum Report to Ofwat, company submission to Ofwat, related customer documents) note this is not about content Forum and company to coordinate how documents would be published. Company to bring head of their PR14 publication steering group to a forum meeting. Melanie Laws to be the Forum contact in publication matters. Willingness to Pay The NWL process relies on customers valuation. Environment Agency to share their work (draft) on including ecosystems services values in the process. Ofwat guidance to CCGs on their role in the business planning process AC will be talking to Rob Powell (Ofwat) she will feed back to the Forum after this. Water Resources Management Plan Forum to be consulted on the plan by email. Sources of environmental phosphate The Forum asked for if the phosphate issue was being caused by humans or by farming. The EA agreed to provide more detail. The Forum asked what the company intends to do regarding the beach at Seaton Carew KO agreed to supply this information. Structure and content of Report to Ofwat BHS handed out hard copies of a first early draft members were asked to consider this and get back to him with comments. Socio economic information is needed for Forum Report to Ofwat Forum members and the company to provide materials suitable for the Report.

ANDREA COOK

37

CAB

38 39

NWL NWL

40

Forum (EA)

41

ANDREA COOK

42

NWL

43

Forum (EA)

44

NWL

45

Forum members

46

Forum and NWL