Key actors in the governance space for drought planning in England
Below is an overview of key actors that populate the governance space of drought planning mainly in England. The note describes the role of mainly organizational actors and refers to key legal and information resources available to them
In England water companies are privatised entities with shareholders. Many of the water companies are public limited companies trading on the stock market whether they provide water services only or both water and sewerage services.
While water companies have significant discretion when deciding how to manage water resources they are also constrained in their decisions, firstly, by environmental statutory standards they have to comply with, which are developed by DEFRA and the EA, and mainly enforced by the EA. Water companies are, secondly, also constrained by the regime of economic regulation imposed by Ofwat which can limit expenditure on specific drought management options. S. 37 (1) Water Industry Act (WIA) 1991 is a key legal duty that frames decisions taken by water companies. It imposes a duty upon water undertakers ‘to develop and maintain an efficient and economical system of water supply within its area’ and to ensure that all such arrangements have been made:
- for providing supplies of water to premises in that area and for making such supplies available to persons who demand them; and
- for maintaining, improving and extending the water undertakers’ water mains and other pipes, as are necessary for securing that the undertaker is and continues to be able to meet its obligations under this Part.
When seeking to discharge their legal duties under the statutory framework, such as those imposed by S. 37 (1) WIA 1991, water companies face the challenge of influencing their customers’ behaviour. Every water undertaker, or those licensed to supply water, is under a duty to promote the efficient use of water by its domestic and commercial customers (S. 93 A (1) WIA 1991), but this power is qualified by a provision that states that water companies have no power ‘to impose’ requirements upon their customers or potential customers (sect. 93 A (3) WIA 1991).
For instance, water companies can only invite but not force domestic customers to have water meters installed and be charged on the basis of them, unless the water company operates in an area that, also upon advice from the EA, has been designated as water scarce by the Secretary of State heading DEFRA. But the economic regulator of the water industry, Ofwat, with the consent of or in accordance with a general authorisation given by the Secretary of State heading DEFRA, can require water undertakers to take actions or to achieve overall standards of performance in order to facilitate compliance with the duty to ensure efficient use of water by its customers (S. 93 A (2)(b) WIA 1991). Ofwat’s powers for promoting demand management in this way are further qualified. First, Ofwat has to consider what water resources are actually available to water companies (S. 93 B (4) WIA 1991); and second, it has to consult the water undertaker, before exercising this power (S. 93 B (5) WIA 1991).
In exercising their legal powers and complying with legal duties water companies and the EA as well as Natural England share some environmental science data. To gather information about service expectations and to develop levels of service, water companies survey customers.
 Or if there is a new occupier of a property or a range of specific watering devices are used, such as garden sprinklers, automatic filling of swimming pools, or extra large baths, power showers, or reverse osmosis water softening units.
The Environment Agency for England (EA)
The EA is the key environmental regulator of drought. Its role in relation to drought is both strategic by being involved in longer term planning processes that seek to prevent water scarcity and drought. It is also responsive in the short-term because it plays an important role in making specific drought management options happen during a drought including granting or denying water company applications for drought permits or making its own applications to DEFRA for drought orders.
The EA plays a central role in the production of statutory Drought Plans by water companies. Until 1 April 2014, the Agency was organized into a three tier structure of areas, regions and head office; after that date the regional level was removed. This restructuring is largely understood as a response to reduced financial resources. Some research participants suggested that this may reduce the scope of environmental science data available through the Agency, and may lead to greater reliance on guidance in the exercise of powers, rather than individualized exercise of discretion. Our research further suggests that there is some variation among EA area offices in how they become involved in overseeing the process of statutory drought planning. This is related to both the particularities of sites in relation to which drought management options, such as drought orders are considered, as well as differences in how area offices approach drought planning.
The legal framework provides powers for the EA by designating it as a statutory consultee for water companies’ Drought Plans (S. 39 B(7)(a) WIA 1991) as well as water companies’ Water Resource Management Plans (WRMPs) (S. 37A(8)(a) WIA 1991).The EA is also a statutory consultee for water company applications for drought orders (Schedule 8 para. 1 (1) (a) WRA 1991) and it decides upon water company applications for drought permits. More strategically, the EA has developed soft law guidance, the EA Drought Plan Guideline, which steers how water companies fulfil their statutory responsibilities of developing Drought Plans. This includes guidance on how drought is defined through so-called triggers in the water companies’ Drought Plans.
When exercising its legal powers the EA exchanges environmental science data with most of the other key actors in the governance space of managing drought. Many of the exchanges between the Agency and other key actors are bilateral, and involve water companies, Natural England, Defra, environmental consultants and to some extent customer-citizens. At the area level the EA rarely engages with Ofwat, DWI, or CCW.
Our interview data suggest that the EA would like water companies and/or consultants to generate more environmental science data, including baseline monitoring and data needed to support specific applications for a drought permit or drought order. Where environmental science data are specifically relevant to applications for drought orders or permits of particular water companies, these data are less likely to be shared with other key organizational actors in the drought governance space.
Consultants, based at a limited number of key consultancy firms, are central actors in the governance space of drought planning since they mediate and diffuse environmental science knowledge as well as knowledge about the system of drought regulation between regulators and water companies.
Consultants have significant expertise in how the regulatory regime is applied by various government agencies, and they understand the different angles from which various organizational actors involved in drought planning view the legal provisions. Consultants work for many of the other actors in the governance space and translate knowledge between them: ‘As a consultancy, the consultancy I work with and the likes of [Consultancy] who we work with very closely on some projects, we feel that if your clients include both the regulators, Natural England, and water companies, then it allows you to get a view from each side’ (Interview A2.DP1.CON1).
Moreover, consultants often fill expertise or capacity gaps at water companies: ‘lack of time and resources. Some expertise I think as well, we are specialists’ (Interview A2.DP1.CON2, person a)[…] because the detail required [by the regulations] needs specialist knowledge of fisheries and water chemistry and those sorts of things, so we provide that as well as the overall putting it together and making sure it meets the Environment Agency’s requirements and legislation’ (Interview A2.DP1.CON2, person b). Hence, consultants are major brokers of data, environmental science expertise and knowledge about the regulatory regime. With respect to proprietary data they may be restricted by legal agreement from sharing it with other actors in the governance space. Their role in drought planning is also shaped by the fact that they work as agents for their clients, who are subject to the regulatory regime, which limits their independent decision-making powers.
‘People’ feature in various ways in drought planning. They are engaged as citizens when granted rights to be consulted on water companies’ draft statutory Drought Plans, and when they organize in non-governmental organisations, such as the Rivers Trust and affiliated local action groups, such as ‘Action for the River Kennet’, as well as unaffiliated local action groups, such as GARD, the Group Against Reservoir Development at Abingdon. But people also feature as private paying consumers of water and sewerage services. In particular as domestic customers their views on what they are prepared to pay for water services will influence Ofwat’s decision-making during the price review process for water companies. Moreover, domestic customers’ views will also be considered through ‘willingness to pay’ surveys that water companies conduct, when developing their charging schemes, and when drafting their statutory Water Resource Management Plans.
While the role of customer-citizens in drought planning was not a major focus of our research, the interview data yielded the interesting insight that there is more citizen engagement during drought through comments during public consultation phases on specific drought permits and drought orders than during drought planning, when the 5 yearly water company draft statutory Drought Plans are subject to public consultation.
The potential influence of customer-citizens in the governance space relating to drought planning stem from a range of legal resources. Water companies are under a legal duty to bring their draft statutory Drought Plan to the attention of people likely to be affected by it. Citizens then can make representations to the Secretary of State in relation to the draft Drought Plan (S. 37 B (3) (a) and (b) WIA 1991). Moreover, Para. 1 (1) (a) of Schedule 8 of the Water Resources Act 1991 specifies as statutory consultees for drought order applications:
- citizens for whose protection the drought order has been made and who are so specified in the drought order,
- those to whom a prohibition or limitation on the use of water specified in the drought order applies, and who are named in the drought order,
- and owners, occupiers or lessees of land who are affected by the drought order, where the drought order authorizes the occupation or use of land (Schedule 8, para. 1 (a) WRA 1991).
Some water companies suggested that citizens’ engagement with the drought planning process – which is embedded in the more strategic wider water resource management process – was hampered by the fact that citizens would not necessarily distinguish between the two planning processes, and thus e.g. suggest the building of a reservoir in response to a consultation on an operational statutory water company Drought Plan.
Ofwat is the economic regulator of the water industry in England and Wales. It regulates the water industry because even after privatisation water companies are still regional monopoly operators, particularly in the domestic water supply and sewerage services market. Market forces that would normally be expected to favourably influence prices charged for water and its quality are therefore limited. Ofwat conducts a price review process with water companies every 5 years through which it limits prices that water companies charge domestic and non-domestic customers. Ofwat’s regulatory oversight function can reach deep into the business decisions of water companies, affecting how much capital they can spend on infrastructure development from reservoirs to desalination plants. Ofwat also shapes drought management through decisions on specific infrastructure investment. For example, Sutton and East Surrey Water Drought Plan 2013 notes that its preferred supply side development – involving the upgrading of the capacity of water treatment works at Bough Beech reservoir – was not supported by Ofwat in its determination of price limits for 2010-15. Hence, the economic regulatory framework as mainly implemented by Ofwat, through its decisions and the incentives it creates, can steer toward specific drought management options.
Economic expertise, sometimes contested, is thus another crucial resource for organizational actors in the drought planning governance space. The significance of this expertise mobilized by an economic regulator in drought planning is distinct and somehow unique also in an international comparative context. In many countries, water companies remain under state ownership and prices for the supply of water are therefore set by the state.
There are a range of legal resources that underpin Ofwat’s role in drought planning. Most importantly, Ofwat has a general legislative mandate that frames its decisions in relation to water companies’ Business Plans which are informed also by how water companies seek to ensure water availability through their Water Resources Management Plans. The general legislative mandate (S. 2(2)(A)WIA 1991) imposes several duties upon Ofwat:
- to further the consumer objective
- to ensure that the functions of water and sewerage undertakers are ‘properly carried out’ in respect of every area of England and Wales
- to ensure that water and sewerage undertakers are able to finance the proper carrying out of their functions, in particular by securing reasonable returns on their capital;
- that the provisions in the licence of a water supplier are properly carried out and the statutory requirements imposed on the water supplier as a consequence of the licence are complied with;
- and to further the resilience objective.
The resilience objective is particularly significant for preventing and managing drought. In relation to the specific process of water companies drafting their statutory Drought Plans Ofwat, however, does not provide much input. As one industry consultant suggested: ‘I think in recent years, the reorganisations at OFWAT mean that there are far fewer people whose technical remit covers water resources and drought planning’(Interview A2.DP1.CON1). When Ofwat does become involved in drought management specifically, its main concern also during a drought is competition according to a water company representative: ‘So during the 2012 drought when it was very clear that there was a very intensive drought, they [Ofwat] were keen to ensure that, where possible, [water companies were] supplying other companies where [they] could with water and vice versa. So it’s very much they’d be looking at it from that sort of competition angle, and equally to ensure that we’re not being anti-competitive in doing anything” (Interview A2.DP1.WC1).
Defra is the UK government Department for Environment, Food and Rural Affairs. It represents the executive in the governance space for drought planning. It heads the civil service and develops policy and proposes legislation. Defra oversees the process of statutory water company drought planning also on the basis of technical advice from the Environment Agency, though it does not have to follow this advice.
There are various legal powers that shape the role of the Secretary of State (SoS) heading Defra in the governance space of drought planning. The Secretary of State has to be consulted on the draft Drought Plan by the water undertaker (S. 39 (B) (7) (c) WIA 1991) and the SoS can give a direction to the water undertaker about the form that the Drought Plan should take (S. 39 (B) (8) WIA 1991). Moreover, during drought the SoS decides, also with reference to technical advice by the EA, whether to approve or reject an application for a drought order lodged by a water company or the EA (S. 73(1) WRA 1991).
Natural England (NE)
Natural England (NE) is the government’s advisor in relation to nature conservation. Its main role is to provide advice in relation to water company draft WRMPs and draft Drought Plans where these affect protected species and their habitats. Furthermore, NE may be consulted on proposed drought orders or permits in order to advise on the potential impact of increased abstraction of water from the environment on protected species and habitats. NE is a small agency with limited resources operating at arm’s length from DEFRA. It often works closely together with the EA when reviewing water company statutory plans.
A range of legal provisions flesh out further NE’s role in the governance space of drought planning. NE is not a statutory consultee for water company’s statutory Drought Plans (S. 39B(7), WIA 1991), but it is recommended to be consulted in soft law, i.e. the EA Drought Plan Guideline. Hence, NE provides to the EA and water companies environmental science knowledge of designated sites. Their comments can be important: ‘They [NE] consulted on our plan and it’s particularly important that we take into account everything that they say in response to our plan, because the sites that they’re involved in managing are sensitive ones and we work closely with them’ (Interview A2.DP1.WC1). Another interviewee suggested: ‘Natural England’s comments on the impact of a drought permit or drought order are also very important’ (Interview A2.DP1.WC11).
The Consumer Council for Water (CCW)
CCW is an independent statutory representative of household and business water consumers in England and Wales. Its work includes handing complaints from water consumers in relation to water companies. The Consumer Council for Water participates in Ofwat’s Price Review Process through Customer Challenge Groups. CCW also contributes to long-term strategic policy planning such as market reform, in order to ensure that non-domestic customers will benefit from market reforms and that those serviced by regional monopoly suppliers are not disadvantaged. In addition, the CCW educates consumers about efficient water use and encourages water companies to provide information to customers on leakage measures.
The CCW Operational Business Plan for 2014-5 refers to two areas of activity specifically that are relevant for dealing with water scarcity. First, the CCW will develop research into water efficiency gains through metering of water use, and will facilitate work by water companies introducing water metering, also by supporting customers switching to metered charging. Second, the CCW will contribute to the Steering Group for the Water Resource Management Plan Review to represent the water consumers’ voice. Our research suggests that the water industry considers the CCW as an important source of information about consumer views of the water industry, e.g. in relation to acceptable leakage levels.
A range of legal resources further flesh out the role of the CCW in the governance space of drought planning. The legislative mandate of the CCW is to exercise its powers and perform its duties in such a way as to promote sustainable development (S. 27 A (12) WIA 1991).
The Drinking Water Inspectorate (DWI)
The DWI regulates the quality of drinking water and helps Ofwat to fulfil its legislative mandate regarding water supplier licences and compliance with statutory requirements. To effect this, the DWI participates in Ofwat’s price review process and thus the review of Water Company’s Business Plans, in particular in relation to those parts of the plan that concern the financing of the maintenance or improvement of drinking water quality. Water companies identify improvement schemes they consider are required. DWI may challenges the justification for those schemes and agree drinking water quality programmes, also by using various legal instruments.
The DWI’s role in relation to drought planning is rather indirect. Where water scarcity constitutes a risk for the quality of drinking water supplies the DWI’s regulatory powers would then be an indirect lever for augmenting the quantity of water supplies in order to dilute pollutants that in higher concentrations would lead to breaches of legal requirements for the quality of drinking water.
The role of the DWI in the governance space of drought planning is shaped by a range of legal provisions. The DWI implements European Union (EU) legislative standards on drinking water quality, i.e. the EU Drinking Water Directive, (Council Directive 98/83/EC of 3 November 1998, as amended, on the quality of water intended for human consumption). It is seldom though that during drought the EA would deal directly with the DWI (Interview A2.DP1.REG3).
Lange, Bettina, and Christina Cook. “Mapping a Developing Governance Space: Managing Drought in the UK.” Current Legal Problems (2015): cuv014.