Welsh Water

6. Topical Questions – in the Senedd on 12 July 2023.

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Photo of James Evans James Evans Conservative


2. Will the Minister make a statement on Welsh Water having its rating reduced by Natural Resources Wales? TQ825

Photo of Julie James Julie James Labour 3:27, 12 July 2023

Yes. I have been very clear with Dŵr Cymru Welsh Water that we expect water companies in Wales to provide the highest standards of service to customers and to protect the environment. The reduction in Dŵr Cymru Welsh Water's rating is very concerning. My officials are working closely with them and Natural Resources Wales to ensure the necessary improvement in their environmental performance.

Photo of James Evans James Evans Conservative 3:28, 12 July 2023

I'd like to thank you for your answer, Minister. It was very deeply concerning to read about the recent announcement that Dŵr Cymru have been downgraded again, for the second year running, for failing to make the improvements necessary to clean up our waterways right across Wales. The company is reporting more and more serious pollution incidents, and it seems that nothing is being done to stop them. Their self-reporting of these serious pollution incidents is being reduced as well. Minister, Dŵr Cymru customers have the second highest bills in England and Wales. They have one of the highest-paid chief executive officers in Wales, who took home a bonus this year of £232,000. It is shameful that Dŵr Cymru cannot get its act together, and I do think it's about time that the Government stepped in here. So, will the Government step up to the plate and sort Dŵr Cymru out once and for all so we can clean up our rivers and bring forward urgent legislation to clean up our inland waterways within Wales, which is the devolved competency of your Government?

Photo of Julie James Julie James Labour 3:29, 12 July 2023

I'm not entirely certain what I'm being asked to do there. Are you asking me to nationalise Welsh Water? Welsh Water is a private not-for-profit company. It's not controlled by the Welsh Government, so I'm not really certain whether you're asking me to nationalise it. I have a limited number of levers at my disposal. Many of the levers are, of course, with the UK Government. This is a privatised utility, so it is—

Photo of Julie James Julie James Labour

I cannot regulate it, actually.

Photo of Julie James Julie James Labour

No, I cannot. The regulation powers are not with the Welsh Government.

Photo of Darren Millar Darren Millar Conservative

Pollution is your responsibility.

Photo of Julie James Julie James Labour

Pollution is, but the regulation of water companies is not with the Welsh Government, so, you could very helpfully suggest to the UK Government that the regulatory framework is not fit for purpose, as we do, and—[Interruption.]

Photo of Elin Jones Elin Jones Plaid Cymru

Darren Millar, this is not your question. You're seeking to intervene on your own Member here. It is James Evans's question, and the Minister is trying to respond to it.

Photo of Julie James Julie James Labour 3:30, 12 July 2023

So, a number of the things that James Evans set out there—. I believe all Members have received the same information as I have as a Senedd Member, from Welsh Water; if you haven't, then I can certainly forward it to you. As I say, I do not control Welsh Water; it is not a nationalised industry, it is a not-for-profit private company. But we scrutinise Welsh Water, alongside Ofgem, and, indeed, the UK Government, all the time. I am very concerned at their drop in performance. I absolutely agree with that. And a large part of that is because of the way that the price mechanism works. The price mechanism is set at a UK level, on a five-year slide, as it's called, and, unfortunately, the way that it is currently regulated means that any improvement has to be paid for by bills. So, I'm not entirely certain what the Member is asking me, really, because I do not control Welsh Water. So, I will respond, as I said—[Interruption.] I hold Welsh Water to account; the Member is more than happy, I'm sure, to do the same thing in any committee he is part of, or in his private capacity, to ask for a meeting with them. We do that on a very regular basis. I meet with Ofgem, Ofwat on a very regular basis, and with the UK Government. I will be holding Welsh Water Dŵr Cymru's feet to the fire over this. But the truth is that they have a limited ability to invest because of the price mechanism. They have set that out for you, and every other Senedd Member, in the information that they've provided.

You also said, I think I'm right in hearing you, James—forgive me if I got it wrong—but I think you said that there were a large number of serious pollution events. [Interruption.] Well, actually, the increase in serious pollution events, just to be clear—and it's not acceptable—but just to be clear, it's from three to five. So, just to be really clear. It's absolutely disappointing to see that, and I don't think it's good enough, but those are the figures. There is a further drop in the number of self-reported incidents, and a slight increase in the number of low-category incidents—from 81 to 84. None of these things are acceptable, but it's important to get the figures right. So, it's also—. There's no point shaking your head at me, those are the figures—[Interruption.] Those are the figures. So, I agree, it's not good enough, and we will be taking it very seriously indeed. I am not happy at all about it. But I'm not entirely certain where your question was leading—forgive me if I'm not quite understanding it, but you seem to be asking me to nationalise the company, which is clearly not really acceptable.

Photo of Delyth Jewell Delyth Jewell Plaid Cymru 3:32, 12 July 2023

Minister, surely part of what we're witnessing here, and, indeed, with sewage increases across the UK, is a consequence of weakened environmental governance in the wake of Brexit. Wales has waited for too long for the delivery of new arrangements to tackle this issue. European Union regulations protected and empowered Welsh citizens to report on breaches of environmental law, holding corporations to account. Since leaving the EU, with the disastrously hard Brexit that was pursued relentlessly by the Tories in Westminster, all nations apart from Wales have developed their own environmental governance mechanisms. We are, unfortunately, still the only country in the UK without those robust environmental governance arrangements. I know that you share my frustration about the situation.

Could you talk us through, please, in this interim period, what powers are at your disposal to take swift action to address this increase in pollution incidents? Because I think that this is one of the issues that, when members of the public look at this happening, people are in despair about it, and nobody seems to be able to, or at least there doesn't seem to be clarity about what can be done. So, do you agree that part of this is a consequence of that environmental governance gap because of the hard Brexit that we have? And what can be done to further empower Welsh citizens and to improve the well-being of, yes, our waterways, but also the people who want to live near, who want their children to be able to play in waterways, for us to be able to actually get the right engagement and be able to have that back in our lives? Diolch.

Photo of Julie James Julie James Labour 3:34, 12 July 2023

Thank you, Delyth. I think it is really important to get the facts straight. So, I completely agree with you about the hard Brexit and the difficulties of that, but just to be really clear, and just to set out for Senedd Members exactly how this works. So, performance is measured by NRW and the Environment Agency, who apply targets for each business planning cycle, with what's called a 'glide path', which is a tightening of standards over a five-year period. So, we're currently in the 2020-25 period. The five-year glide path thresholds set are evidence based, taking account of the previous performance of water companies over a three-year period, which for this assessment will be the 2016-18 period, and the water industry's strategic environmental requirements expectations. So, for example, for serious pollution events, the targets for Dŵr Cymru Welsh Water are one incident for green, two to three incidents at amber and four or above for red. For the 2023-24 period, there will be one, two and three, and for the 2025 period, nought, one and two. So, you can see that they're going down. So, they're being held to a higher standard at each point in the glide path. That's not an excuse, by the way; it's clearly not good enough, but just for you to understand what they're being held to account by. 

We put a guide in for the price review mechanism, so we put our priorities in. Tackling overflows is a key focus of our work to improve water quality, but, again, it's important to get the facts right, and I'm not suggesting this is good enough, but just to be really clear: 44 per cent of our rivers are in good environmental status, which is against a very much lower number in England, and we still have—despite the fact that we have more coastline—we still have a very high proportion of our beaches in good environment. So, I don't want the public to be unnecessarily concerned and not, for example, take advantage of the Welsh coast over the upcoming summer. But it's not good enough. I would very much like it to get very much better than that. So, we're working closely with delivery partners, regulators and the relevant sectors to implement sustainable solutions. The water companies are all currently developing their business plan, so 2025-30, which is the price review mechanism that I was mentioning, which will include the programme of work to address any environmental harm caused by storm overflows.

Now, I have to say, I suspect you agree with me, Delyth, that I do not understand how putting the infrastructure in place to have the very best water quality in the world is not an investment programme capitalised by the Government. I do not understand why that has to be put onto the bill payers. That is a choice by the UK Government, and is not a choice that I approve of, and it absolutely limits the amount of investment that can go in, because, obviously, we can't have water bills unaffordable across Wales. So, it is a really difficult conundrum, if you're limited to the amount of money that you can charge your bill payers in order to put the investment in. It's, in my opinion, a fundamentally wrong way to do it. But, as I say, Welsh Water is a private company; it is a not-for-profit, which I am very pleased about, but it is a private company not in the control of the Welsh Government.

Photo of Jenny Rathbone Jenny Rathbone Labour 3:37, 12 July 2023

Thank you for all that information, Minister, and I think it's really important, as you say, to get the record straight. But it is also really important that we get this right, because there is an increasing shortage of water across Europe, across the world, and, therefore, we should be husbanding our water and ensuring that it is of the best possible quality. So, I agree with you that it all ought to be funded out of taxation, but we haven't got that at the moment; it's just loaded on to bill payers. But, I think, one of the ways I would like to see progress made is to ensure that we can make money out of muck, if we handle it correctly. It can be made into—. Particularly if the water is squeezed out of it, it can be used suitably for enriching our soils and improving the growing environment. So, in your conversations with Welsh Water, I wondered if you could talk to them about how we improve the handling of waste in our sewage plants, so we can have more of what they produce sold for the benefit of the country, and less of it—much less of it—going into our rivers and seas.

Photo of Julie James Julie James Labour 3:38, 12 July 2023

Jenny, that's a very good point. As part of the summit process, as we call it, working on the phosphate problem—although the phosphate problem is just one of the problems that's being looked at—we are looking at a variety of solutions, one of which is exactly that: to try and turn what is now a difficult waste into a money-making product for sale, and that is definitely one of the considerations that we're looking at. We've also done some source apportionment for that. So, we've commissioned an independent company to do a source apportionment across all of the SAC rivers—the special areas of conservation rivers—for the nine in Wales. The models can be used to determine the contribution of sources to phosphorous concentrations in the river and assist to develop a programme to reduce the inputs, which we do via the better river quality management boards and the nutrient management boards. We have a number of boards set up to work on these, who are looking at your point as well. And then, actually, this is additional to what I was saying to you, Delyth, which I know we've discussed before.

And just to say, and, again, I think the facts are very important here—and this is not to take away from the fact that Dŵr Cymru Welsh Water needs to up its game in big way, but—rural land use is the leading contributor of phosphate in six of the nine SAC rivers, including four of the failing SAC rivers. That's just a fact. It represents the largest proportion of phosphorus loading in the Tywi, for example, at 86 per cent, compared to 11 per cent from waste water treatment works, and 2 per cent from combined sewer overflows. I make that point not because 2 per cent from combined sewer overflows is okay—it isn't—but we have to get some sense of proportion into what we're actually trying to do here, and until we accept that every single sector of Wales has got to up its game, including the water companies—every single sector has got to up its game—we will not get the water quality we want.

Photo of Jane Dodds Jane Dodds Liberal Democrat 3:40, 12 July 2023

I just want to be brief here. I, like others, met with water pollution campaigners outside the Senedd yesterday, and there is real confusion here, because Dŵr Cymru do say that they don't have money to do some of the work that they're supposed to be doing, and yet—and I'm sorry to go back to this—three of their top executives had bonuses worth £931,000, with the chief executive annual salary being £309,000. I hear what you're saying, Minister, about not having them in our control, but what confidence can we give to the Welsh public—including those campaigners who were outside the Senedd yesterday—that we are holding them to account in some way, and that we can have confidence in Dŵr Cymru and our water company? Diolch yn fawr iawn.

Photo of Julie James Julie James Labour 3:41, 12 July 2023

What we have is a privatised utility, effectively, and it would not be my particular view that that was a very good model for providing any kind of essential utility, but that's what we've got. I have no formal role in determining executive pay for Wales's water companies, but we do monitor pay and performance. We expect the relevant remuneration committees to reflect carefully on performance and delivery against the breadth of current water sector and environmental challenges. Ofwat has also set out the expectation for companies to provide robust and clear explanations of performance-related executive pay. They are clear that performance-related executive pay should demonstrate a link to stretching performance delivery for customers, which includes environmental commitments and obligations.

I'm not here to be an apologist for people who are paid an enormous amount of money. It is an enormous amount of money. It isn't an enormous amount of money compared to some of the other water companies, but I don't see how that is relevant, because it's an enormous amount of money. I am informed—I have no power over it—I am informed that the chief executive and the chief finance officer have forgone their executive bonuses for 2022-23. But I would suggest, Llywydd, that there are a number of committees in this Senedd who could also invite Dŵr Cymru Welsh Water in to give an account of themselves.

Photo of Elin Jones Elin Jones Plaid Cymru 3:43, 12 July 2023


I thank the Minister. The next question is to be answered by the Minister for Economy and it's to be asked by Jack Sargeant.