Before 1990 the water utility sector in the UK was largely state owned. Privatisation of the water industry in England and Wales created 10 major regional water and sewerage companies (each with several million customers) and 15 smaller water only companies. Water provision for Scotland and Northern Ireland still remains within the public sector. To oversee the activities of the privatised companies, the Government created an industry regulator: The Office of Water Services (OFWAT).
Privatisation and the influence of the regulator have proved to be the key drivers on metering activity within England and Wales. This influence can be seen in pressure to control demand and to open up the industry to competition.
- Privatisation of the water industry
- Regulatory requirements
- Resource management
- Competition within the industry.
RECENT HISTORY – DOMESTIC METERING
In 1989 nearly all domestic properties charged for water as a proportion of the property value of the house (the rateable value system). At that time Thames Water had less than 1% of domestic properties served by a meter and this was typical for the UK. Water meter penetration was very low in comparison to many other developed countries.
As part of privatisation the utilities were required to find alternative charging schemes for all newly-constructed properties. The regulator regards metering as the fairest option, and has clearly indicated that water meters are the preferred basis for paying for water in the UK. 1990 therefore marks the start of widespread domestic metering in the UK.
Government policy in 1990 was to remove all customers from charges based on rateable value by the year 2000. This has since been rescinded as impractical. From 1990 onwards the regulator encouraged meter installation at existing properties, either as a customer service requirement or as a demand management tool. Metering has been adopted with different degrees of enthusiasm by the individual water companies, depending on their circumstances. As recently as 1999 low consumption households wishing to reduce their bill could expect to pay hundreds of pounds to have a meter installed. Experience has shown that large numbers of customers have switched to meters only where a zero cost option is available. For example, between 1997 and 1999 Thames Water was able to install 330,000 meters once they were offered free. The regulator now requires all water companies to offer a water meter at zero cost to the customer. For the utility this invariably reduces revenue and increases operational costs.
In the resource-scarce areas of the UK (the south and south east) meter penetration is highest (up to 50% in some cases). This has been achieved by a mixture of optional metering and fitting meters to unmeasured properties whenever a change of occupancy occurs. Meter penetration is lowest in the state owned (and damp) Scottish Water region.
In recent years (2000 onwards) the uptake of optional meters has slowed. Although OFWAT favours metering, the tight funding regimes and across the board price cuts (of between -2.7% and -19%) imposed by the regulator have reduced customer demand for meters. Remarkably, in the UK the majority of households are still paying for water services as a proportion of the value of the house as it was calculated during the last general re-valuation in 1973! Meters now serve 23% (4.8 million) of the 21 million households in England and Wales.
Metering is universal for all but the smallest commercial concerns, and there is now very little growth opportunity in the commercial sector. The volumes of water recorded by commercial meters in the UK has actually declined slightly from 3,804 Ml/d in 1998 to 3,712 Ml/d in 2002. The emphasis in recent years has been towards ensuring that commercial meters do not under-register. This has been achieved by ‘right sizing’ programmes involving logging and replacing meters, or the introduction of more expensive combination meters. The commercial sector is far more diffuse than the domestic arena, with water companies adopting a variety of technologies including Helix (Waltman) single-jet and multi-jet and combination meters.
A recent trend has been the introduction of electro-magnetic meters (such as the ABB AquaMaster) to record revenue at high user sites. Electro-magnetic meters have been widespread for district and zonal metering in the UK for some years, but their use for revenue metering is a recent departure. The increase in understanding of mechanical meter failure and under-registration is improving the case for electro-magnetic meters in spite of higher initial procurement and installation costs.
COMPETITION IN THE UK WATER INDUSTRY
In the UK the privatisation of the gas and electric utilities has produced effective competition right down to the domestic level. Customers can choose from a wide variety of suppliers in the energy market. The government and regulator are attempting to introduce limited competition to the water industry. This is starting to have a marked effect on the perception of meters as data collectors rather than simple ‘cash registers’.
To reflect these changes, companies such as Thames Water now have extensive telemetry systems connected to key commercial users to provide data on consumption patterns and meter replacement strategy, and to provide enhanced customer service. This trend is likely to continue, as the price of telemetry has fallen considerably in recent years with the introduction of battery powered loggers (from companies such as Technolog, Radcom and Primayer) using GSM mobile phone technology.
Competition could also be extended from a single site to organisations wanting aggregate billing across traditional water company boundaries. This would require some form of telemetry or automatic meter reading (AMR) system. A recent example of cross-boundary competition has been the UK’s Ministry of Defence, which has put its water services out to contract on a regional basis rather than dealing with individual water companies directly. This contract has seen the MoD make extensive use of logging and telemetry services.
METER READING AND AUTOMATIC METER READING
Meter reading for the majority of UK meters is still a task carried out by a meter reader carrying a hand-held terminal. For domestic users this generally means a visual read one to four times a year from a meter located in a boundary box in the footpath. The highest commercial users are read more often, with monthly reads being the norm.
The influence of the regulator is acutely felt in the meter reading area. UK water companies are now expected to obtain a genuine (non-estimated) billed read for 99.51% of their meter stock at least once a year. With many single occupancy dwellings and many households empty during the working day, this target is difficult and expensive to meet.
Perhaps surprisingly the target has not lead to a rush to AMR technologies. In general water companies have relied on a combination of externally located meters; flexible working arrangements for meter readers; outsourcing of meter reading to specialist meter reading companies; and the limited use of inductive read technologies (touch-pads).
There are a variety of reasons for the slow take-up of AMR. These include the low density of meters; a host of competing and non-compatible technologies; initial problems with the allocation of a unique (non standard) UK frequency for low power radio systems; and a low average bill value. Typical domestic consumption is 100-120 cubic metres of water per annum. This means that half the meters in the UK will record less than 35 pence worth of revenue per day. AMR in these circumstances is an expensive asset just for meter reading.
Interestingly, large-scale domestic AMR has not caught on for the much more expensive metered gas and electric sectors either. The largest AMR application in the UK is for 100,000 low-power radio units run by BCN on behalf of British Gas. For large-scale power customers, sophisticated AMR with complex tariff options is routinely available. It seems likely that the water industry will follow the ‘high user first’ option for AMR.
AMR in the UK will not be driven by savings in meter reading costs but by requirements to conserve water and cut leakage levels. This could be achieved by the introduction of metered tariff schemes and leakage alert systems. To achieve this goal several water companies have pilot projects to investigate the potential for low power radio AMR.
A second factor influencing AMR deployment is pressure for combined billing services from multi-utilities such as RWE (owner of Thames Water, NPower and Innogy). A significant problem for all the UK water companies will be to integrate all the data from the available sources to match the needs of the regulator, competitors, demand management and the customer.
Privatisation and the regulator have pushed metering in the UK. In the domestic sector there is still considerable scope for growth in meter numbers. In the commercial sector the emphasis is much more on protecting existing revenue streams by the use of appropriate metering technology. Competition within the high user commercial sector is making water companies look to AMR and telemetry to provide higher levels of service. Widespread AMR use still looks some distance away, but pressures are building for AMR solutions that will help with demand management and leakage control.
OFWAT Report “Security of supply, leakage and the efficient use of water 2001-02”.
OFWAT Press Notice “Price limits for 2000-01 to 2004-05”.
OFWAT “Water and Regulation:Facts and Figures December 2002”.
Richard Franklin would like to thank Mark Holt of Thames Water for his help in writing this report and collecting the data.