Deborah Feldhaus, Geoff Darch and Doug Clarke.

Q134 The Chair: Good morning and welcome to the Lords Environment and Climate Change Committee. Today, we will be continuing with our inquiry into drought preparedness and taking evidence from our panel of expert witnesses from water companies about their role in planning for and managing droughts.

Before we start, may I remind everyone that the session will be webcast live on parliamentlive.tv and that a transcript will be taken and made public? Witnesses will have an opportunity to review the transcript and, if necessary, make very minor amendments. Members are reminded that they should declare interests the first time they speak, and I will take this opportunity to say that I am a director of Peers for the Planet and that I jointly own a borehole at my home in Oxfordshire.

Before starting, may I ask each of our panellists to briefly introduce themselves? I will start with you, Geoff Darch.

Geoff Darch: Thanks for the invitation to give evidence today. I am the head of strategic asset planning at Anglian Water. I am responsible for long-term plans, including the water resources management plan, the monitoring of those plans, and the allocation of water resources. I have been closely involved in the development of our drought plans and I sit on our drought management team. I hold a number of external roles, the most relevant of which is that I am a non-exec director of Water Resources East, which is a regional multi-sector water resources planning group.

Deborah Feldhaus: Good morning; thank you for the invitation to give evidence this morning. I work for Yorkshire Water. I am head of water resources at Yorkshire Water and I am responsible for the water resources management plan, which is a long-term strategic plan for water resources, and the delivery of that plan. I sponsor some large schemes we are doing as a result of that plan, and I am responsible for the drought plan in Yorkshire, which includes the current revision that will be going out for consultation this year. I also sit on Water Resources North as regional planning lead, which is another of the regional groups.

Doug Clarke: Thank you again for the opportunity to present evidence today. I am the water resources planning lead for Severn Trent Water, responsible for our water resources management plan and our drought plan. I led the drought action response last year. I am responsible for both tactical deployment of water resources during the year and longer term planning through to 2085.

Q135 The Chair: Thank you very much. Before I launch into the first question, it is really fortuitous that the A New Vision for Water White Paper was published yesterday; great timing on our part. Please feel free to give any thoughts you have about the water White Paper in answering the questions that you address from the committee today. Let us just dive straight in: can I ask each of you how significant a concern future drought risk is compared to other company priorities? What lessons have been learned from the 2025 and other previous droughts? May I start with you, Geoff?

Geoff Darch: Yes, drought risk is a significant concern to us. We operate in the driest region of the UK. The work we have done with universities, the Met Office and others demonstrates that climate change is going to make droughts more significant in the future. It is a concern but it is not the only priority for us: environmental protection; sustainable abstraction; reducing pollution; asset resilience, which was mentioned strongly in the White Paper yesterday; leakage management; and enabling growth are also priorities for us as a company.

In terms of the 2025 drought, the key thing to note is that we are not yet out of it. The Anglian region benefits from very large stores of water, both above ground in reservoirs and below ground in aquifers. This gives us a lot of resilience to the kind of weather we saw last year but it also means that it takes time to replenish those stores of water. We need to have a typical winter this year—100% of long-term average rainfall—in order to get back to a fully restored position at the beginning of the year.

One of the issues I particularly wanted to highlight, which we are facing at the moment, is poor raw water quality. There is water available in the environment right now, in our rivers, but in some locations we are unable to abstract it because, for example, nitrate levels are too high. This means that we will be importing nitrate-heavy water into our reservoirs, which will cause problems for treatment next summer or at a later point. So that is a particularly significant issue for us right now.

You will be aware that we did not apply temporary use bans last summer, partly due to the historical investment in drought resilience that we have made. Most of our customers are on meters, and increasingly on smart meters, which is leading to a reduction in both the average demand and the peak demand that we see in summers.

We know that droughts are becoming more significant and serious. The plan we have is working but we are seeing new risks emerge that we have to manage carefully.

Deborah Feldhaus: Managing drought is a key priority for us in Yorkshire, balanced with environmental protection, compliance, the management of demand and leakage, and supporting growth. In fact, the main objective in our water resources management plan is to become more resilient to droughts over time. We are expecting to be resilient to a one in 200-year drought event by 2028—we are currently resilient to a one in 100-year drought event—then fully resilient to a one in 500-year event by 2039-40 through investment planning. So there is a lot of work on leakage management, demand reduction, and smart metering, but some supply schemes are also going to be delivered this AMP, before 2030, to help us be less reliant on drought measures as we go forward.

The Chair: I am sorry to interrupt but can you say what the one in 200 resilience to drought means in practical terms? What are the criteria or indicators you look at to see if you have achieved that?

Deborah Feldhaus: We look at whether we can supply the right amount of water to be able to prevent level 4 restrictions for droughts occurring no more frequently than one every 200 years. It is about making the water available for supply to enable us to meet that level of service for our customers, so they could expect not to have level 4 restrictions.

Obviously, there was quite a severe drought in Yorkshire last year. We put temporary hose pipe bans on and we submitted a lot of permits for our reservoirs. Customer communication was a big area but we had taken a lot of learning from 2022 on drought permits. The drought permits were ready last year but it was still quite a protracted process that took several months to complete.

In terms of customer communication, we did a lot more a lot earlier last year. We found that, even when there was no huge message to change or say, it was really important that we proactively communicated with customers and stakeholders to keep them in the loop. Our stakeholder management was thorough, with regular updates to make sure that all stakeholders were aware of where we were. Alongside that, we had other multi-channel communications on video that helped customers engage with us better.

Doug Clarke: Drought risk is one of those risks regularly tracked at board level. Alongside the comments from my colleagues, there are other environmental risks—the safety of employees and all those sorts of things—that are tracked at board level regularly. It is taken incredibly seriously and is a high priority for us.

When we start looking at the lessons learned from 2025, and the significance of future resilience, the key is to actually look at what is going to be different in the future should we have another 2025-type drought. Current resilience is high. We had the driest period on record and yet we were able to balance our raw water resources and not hit any of the level 2 triggers within our region—ones where you would impose restrictions on customers. That is all down to the current flexibility of our system.

We have approximately one-third each of reservoir sources, direct river sources, and, most importantly, groundwater sources. That capacity and level of resilience is going to be eroded in the future. Our ability to cope with this drought was due to the ability and flexibility of our network.

If we want more resilience in the future, and to be better at coping with future droughts, we need to review the timing of some restrictions and the licence capping that are coming in. This would give us a bigger window for investment and ensure that we select the best environmental outcome. It is not necessarily a one-size-fits-all when you look at the impact of ground abstractions. Resilient sandstone aquifers are very capable of coping with climate change and are very resilient during drought periods; they gave us flexibility. That is going to become less.

The other side of it, as we look forward, is that we need additional investment to allow the assets that we will still have to perform over a greater range. Because of the reductions in licences, many of those sites will have to operate at very low and very high levels to come within the long-term licences, which means we have to invest differently. We have to improve and add costs to the investment on those assets to allow them to operate over a bigger range than they do currently. That is not saying that environmental destination, and the overall view of environmental destination, is not important. We need to look after and protect the environment but we need to consider the timing of some things to allow us that greater investment.

The Chair: I will come to Lord Layard and then Lord Trees for supplementaries. Please would members keep the questions short and our witnesses keep their answers short? Lord Layard.

Lord Layard: It is very helpful to have that precise definition of resilience. Can you tell us what level 4 restrictions are? How much economic cost suffering do you think is incurred by the community when the level 4 restrictions are enforced?

Deborah Feldhaus: The level 4 restrictions would include things like rota cuts, so switching customers off on a rotational basis. They could include extreme pressure management so they do not get as much water through the taps. It is a suite of emergency measures that happen once you are at the point of approaching what we would call a day zero situation—so when you really need to pull back on the amount of water that is supplied.

It is difficult to put an exact cost on the economic impact but what I can say is, when we have done a cost analysis of what we call non-essential use bans, which is where you ask businesses to reduce their usage, the costs to the economy are quite high. It is based on a cost-benefit analysis that looks at how many days you would prevent at level 4 by applying the bans.

Geoff Darch: The National Infrastructure Commission looked at this question in 2018. It estimated that the cost of managing such an event would be about £40 billion for the UK economy and the cost of preventing us needing such measures would be about £21 billion. So there is a clear economic argument for avoiding as much as possible trying to get into that situation.

Lord Trees: I want to ask a general question about the management of aquifers because it comes up all the time. We heard from meteorologists, at the beginning of this inquiry, that the amount of precipitation in the UK has not changed much in a total year but it has become much lumpier. Floods are the obverse of drought. We abstract from aquifers but can you reverse the process to artificially boost the refilling of aquifers when water is abundant, rather than wait for natural replenishment?

The Chair: A short answer; we will get into client demand in detail later.

Doug Clarke: The short answer is very much yes. We are investigating and exploring options for what is called managed aquifer recharge, which allows you to put water in the ground when there is a surplus and take it out again at another time. That is one element. The other side of it is also very important, being the difference between sandstone aquifers, which are more resilient and allow a slower recharge, and chalk aquifers, which are very flashy and quicker to decline.

Q136 Lord Ashcombe: My question is about emerging demands on the public water supply from housing growth and water-intensive businesses. I am thinking not only about population growth into the future but data centres and hydrogen production, which is probably going to be needed and is water intensive. How confident are you that you are planning for realistic water supply deficit scenarios?

Geoff Darch: We abstract a similar amount of water to that of 30 to 40 years ago despite a 30% increase in population; we have done that through leakage management and the metering of customers. It is possible to manage future demand with demand management measures. However, there are some limitations to that and particular surprises. For example, the Government’s new growth targets came out, after we had completed the last set of plans, with a lot more housing development. Point developments such as Universal Studios or, as you mentioned, things like hydrogen production are very difficult to forecast.

Historically, we had a bit of a pattern. I would almost characterise it as just-in-time delivery of infrastructure but also the regulation of that. We are in a chicken and egg situation where, to justify the investment, we have had to demonstrate that to Ofwat, which has been reluctant to take a more speculative view on potential growth. We have never really been able to increase the capacity. When these new demands come along, the case is that we often do not have the water available and we then have to create that water through new techniques. Data centres are another case in point.

Lord Ashcombe: In our briefing, we have an increase of something like 35% without the data centres, without hydrogen, so we could probably argue 40% to 45% on top of what we use today. That is a pretty significant amount.

Geoff Darch: Yes, it is. The other thing I would say is that, historically, we have always assumed that potable sources of water is what we have to supply partly because it has been very cheap but, for data centres and hydrogen production, they do not need potable sources of water. We would argue that reusing final effluent is actually a much more appropriate source.

Deborah Feldhaus: In Water Resources North, the forecast for increased growth for energy—50% of it is energy—is 220 million litres of water between now and 2050. We do not always have visibility as to where that water might be coming from, particularly for energy, because it is a competitive market.

There is also responsiveness in our plans to adapt to provide water that has not been forecast or foreseen. Our current plans were built on the targets pre the ambitious new targets from the Government. Although we have headroom in our plans, it has to cover other uncertainties like climate change and demand. You may be able to facilitate some growth in the short term from that headroom but over time it will erode the risk in the plan. We welcome the recent consultation from Ofwat on a process to seek funding for additional growth but again, it needs to be responsive enough to allow us to adapt and deliver. We are very supportive of growth in Yorkshire and want to be able to deliver it, but we need to do the right thing in the right timeframe.

Doug Clarke: Yes, we are confident that we are planning. The question is: are we investing quickly enough? Geoff and Deborah have alluded to it as well. We need the introduction of a greater resilience standard, which would allow us to invest for a bigger surplus to cope with these shocks. Now these shocks could come in the baseline, so through changes in population, natural growth; those shock events such as droughts, freeze-thaw events; or even things like the Covid pandemic. We saw changes in consumption from those.

Dipping into that very quickly, if you allow the funding and investment for that greater surplus, it gives you an opportunity for growth when new things come in. Picking a very quick example from our region, things have occurred in the last few years which were not in our WRMP19 plan, so our 2019 plan. They were thought of and developed online, taking millions of mega litres of water a day, before we published our next plan. The planning timeframe means these things can occur very quickly so we need that bigger surplus. We need that headroom.

Lord Ashcombe: Bearing in mind we are looking for so much increase by 2050, is it actually possible to get enough water from what comes out of the sky to run the country as we want to run it? Bearing in mind that the Government want to persuade us all to use less water, in whatever ways they are going to do that.

Doug Clarke: It is a balance of those demand management measures. We need to have more metering and drive down leakage, which we are all doing. It is looking at those alternative sources as well: water reuse and recycling is definitely key. We need the right and pragmatic regulation around that to facilitate more water reuse and we need to revisit views on some licence reductions as well to ensure that we get the free space to allow us to invest in alternative sources, should we need them.

Lord Ashcombe: What would you regard those alternative sources as being?

Doug Clarke: It would be things like the managed aquifer recharge—using the water when it is available because we are seeing, as you said, a slightly lumpier pattern of rainfall. It is water recycling which gives you a constant source of water; there is a definite opportunity there. The final thing is obviously driving down on the demand side to not be losing as much water as well.

Geoff Darch: Another example would be rainwater harvesting. Two new towns are being proposed in our area. You could instantly reduce the demand of those by one-third if you mandated rainwater harvesting for flushing toilets, which is about a third of our consumption. If you look at what has happened in Belgium, where it has mandated this for new properties, it achieves an 80 litres per head per day level of consumption whereas ours is around 120 on measured customers. So it is perfectly possible to do.

Lord Ashcombe: Is that being mandated in the planning review?

Geoff Darch: Not at the moment.

Lord Ashcombe: Would you argue it should be?

Geoff Darch: Absolutely, for new towns in particular.

Lord Ashcombe: It is a no-brainer.

Geoff Darch: Yes. Because you are designing it from the beginning, you can build it into the development from the get-go. It is not as complicated as retrofitting so it is a golden opportunity.

Deborah Feldhaus: There is a consultation out at the moment on water efficiency measures for new builds and we would be keen to see water reuse and recycling in that as well. It is non-rainwater options; so anything that is not reliant directly on rainwater. Mine water reuse is another potential option. We would also look at desalination as part of the options review in general for planning. We look at all options—those that rely on rainwater and those that do not.

Lord Ashcombe: Is the Environment Agency supportive of these types of resource savings?

Geoff Darch: It is supportive but we have to go faster, particularly on permitting things like final effluent reuse.

Lord Ashcombe: Is that because it is being slow?

Geoff Darch: Yes.

The Chair: I am going to move on to Lord Jay because time is against us at the moment. I understand that there are several members who would like to come in but we may address their questions later on in this session. Lord Jay?

Lord Jay of Ewelme: Just picking up on one point in your answer to Lord Ashcombe when you talked about Belgium, I wondered if there are other countries doing things you think are important here. Belgium is a very interesting example; are there others?

Geoff Darch: Yes, there are. You can look at Israel, California, and Australia. Other countries are now seriously looking at and investing in reuse—for example, bigger scale aquifer storage in California. Singapore is putting final effluent—clearly polished to a very high standard—into the public water supply, mixed with other forms of water: what is called direct reuse. Yes, there are some really important lessons that we can learn from overseas that would significantly reduce the amount of water we need.

Lord Jay of Ewelme: Are you all looking at what is going on elsewhere and seeing what implications it might have here?

Doug Clarke: Yes. We have done similar and are actually going to send some teams out to investigate what is happening in Singapore and other countries to identify opportunities and see how we could apply them.

A very quick point on reuse, just picking up on the EA comment: we need clarity and pragmatism from both the EA and the DWI in terms of the standards and conditions that are set on some reuse where it is going into rivers or reservoirs before then being treated for public water supply. We need to improve that and move it forward.

Q137 Lord Jay of Ewelme: I really wanted to ask a question about leakages. You have all stressed it as a priority, which is good for us all because nothing is more infuriating than not being able to water your garden when you see water coursing down the street outside from a leak. It is not too good for your reputations either, so it is good that you are giving it a lot of priority.

We have had figures which suggest that leakages amount to 19% of water use. That seems an extraordinarily high figure even though, as you have all said, you have been reducing leaks over the last few years. Could you say a little about whether that 19% figure is the right figure and what it is made up of? Is it all your fault, as it were, or is it our fault for not doing what we ought to be doing at home? How can it be reduced?

Then one other final question: do you think the proposals in yesterday’s White Paper are sensible? There was some suggestion that what the press calls MOT-style checks could be carried out in order to stop leaks further down the line. Does that make sense to you? Who would like to go first on leakages? Everyone has their hand up. Mr Clarke?

Doug Clarke: We have prioritised leakage reduction and the important thing to stress is that we are on track with our targets. For the Severn Trent region, we are at about 17%, so probably a bit lower than the industry average. We absolutely think delivering on leakage is key to motivating customers to do things themselves; seeing leaks is not going to encourage them to reduce their consumption. It is important to note that achieving the levels of leakage we have has come at a higher cost than we anticipated.

Lord Jay of Ewelme: Why is that?

Doug Clarke: Simply the cost of delivering the activity—the cost of the repairs, materials, interventions that needed to be made, and the number and scale at which we have done it. The way we got to that 17% is by doubling, about six or seven years ago, the number of leak repairs that we do, so around 60,000 a year. That is the key to driving it down. However, you are looking at £120 million a year to deliver that leakage programme. A huge amount of activity is about standing still. Leakage is a little like being on a conveyor at the airport but going the wrong way; you have to go a certain speed just to stand still. The additional activity to bring it down further is incredible.

In terms of where we are getting to, we are on track. We are aiming for a reduction of 50% by 2045, which is five years ahead of government targets, so we are really pushing forward.

In terms of innovation, we are doing a lot on smart metering which helps us identify leakages on the private side, so on customers’ pipes. No-dig repair technology is where you inject things, which is less disruptive for customers and allows you to repair efficiently. We are going to need significantly more mains renewal to overcome that natural rate of rise. That is a real challenge.

In terms of the White Paper, we absolutely welcome some comments in it. Certainly the need to be more proactive, to look to the future, and do preventive checks and things such as increased mains renewal—they are going to help us keep down and get to that level.

Lord Jay of Ewelme: Thank you very much, that is very helpful. Perhaps you could also comment on the cost point. Are you all finding that dealing with leakages is more expensive than was thought? Deborah Feldhaus, please go next.

Deborah Feldhaus: Yes, the costs are higher for leakage. It has to be an integrated approach as well. Your point on the MOT checks, referred to in the paper, is really about asset health. You have to underpin reactive leakage by finding and fixing leaks with mains renewal. In Yorkshire, we have a 10-year strategy for mains renewal. We are doing 1,000 kilometres this AMP at considerable cost. That is prevention: pressure management and mains renewal. You also have to be aware of where the leaks are. We are about 65% metered in Yorkshire. We are not considered water scarce so we do not have universal metering, although metering is clearly very helpful in demand management. It is also extremely good to know where water is going.

Leakage is calculated and not directly measured, and customers interact with data on leakage. A lot of the leaks are from our network but there is also customer leakage as well. This summer we’ve obviously had a huge push on leakage for the AMP to achieve our 50% reduction target, which all companies have signed up to. We spent about £1.5 million last summer helping customers fix their leaks as well. We were able to do this by reaching out to customers where we could see that usage was high even at night, so there are definitely technological advances that should be shared. It is a space where water companies collaborate really well because there is an understanding that leakage is a national issue that we all want to fix, so successes are shared. We probably need more innovation in the mending space Doug has referred to in trying to fix leaks without disruption.

Lord Jay of Ewelme: Thank you very much; that is very helpful. The point about integration is an important one too.

The Chair: Can you keep your answers short?

Geoff Darch: The figure for Anglian Water is 16%. About a quarter of that is customer side, so it is about 12% on our own network.

One of the advantages of having a lot of meters, including smart meters, is that we can really understand what the customer side looks like. When we install a smart meter, we find that 10% of properties have what we call a continuous flow of around 300 litres a day. That is unintended consumption. The proportion of businesses is twice that. There is an awful lot of water that is being used—

The Chair: In households, is that running taps?

Geoff Darch: The biggest culprits are leaky loos. It can include running taps but leaky loos are by far and away the biggest culprits.

We talk about drought in this inquiry. Drought is also very significant for leakage. We get differential movement of soils; clays, in particular, shrink and swell. That causes pipe bursts. We saw a major outbreak of leakage last summer, as we did in summer 2022.

The point on MOTs that I would make is that I do not think we are going to benefit from having lots more people looking at our assets. That is what we do day to day, and we understand them. What we really want to see is a much better footing for investment in capital maintenance, so this point around asset health. The current renewal rate is less than 0.5% per year, which implies a—

Lord Jay of Ewelme: Sorry, did you say 0.5%? Can you say what that is again?

Geoff Darch: A renewal rate of our assets. We would typically only renew less than 0.5% of our pipe assets per year. It would take 200 years to renew the whole network based on current run rates. Other sectors are renewing at a much higher frequency.

Lord Jay of Ewelme: That is a tiny percentage. Has it gone up from an even lower figure?

Geoff Darch: It is going up but the point being made is that it is very expensive. We are spending around £100 million a year to stand still, and then you have to look at the additional investment you need on top of that.

Q138 Lord Layard: I wanted to ask about the need for additional storage capacity and what form the additional supply should take. In particular, are new reservoirs the right approach or should other supply measures, such as transfers, non-potable water or desalinisation be figuring more strongly in the mix? If you are able to, can you send us after the session actual estimates of the cost-effectiveness of these different methods of dealing with the problem?

Geoff Darch: We believe that additional storage is critical for managing drought. I am sure you heard from the meteorologists that we are expecting to have wetter winters and drier summers in future. At the moment this water in winter is flowing out to sea; in our region, where 20% of the land is below the surface of the sea, we are actually pumping it out to sea.

The idea is to capture that water, and we are proposing two new large reservoirs to do that. It is not the only thing that is required, though. We believe that there are additional supply solutions. Reuse is one that we are investing in now and we may need desalination of seawater as well, depending on the level of ambition that we have for reducing abstraction from groundwater and the requirements of industry for decarbonisation, because desalinated seawater is actually a very good feedstock for that. We need more storage. It is a good option but we also need other options to support this.

Lord Layard: Can you send us some calculations?

Geoff Darch: Yes, we can. Those calculations form a critical part of our water resource management plan process. When we looked at all the options available to us in the run up to 2024, reservoirs came out ahead of things like desalination, not just on cost but on other factors as well. I am very happy to share that information with you after the session.

Deborah Feldhaus: Similarly, we value storage. It has to be resilient to drought, as Geoff said, so whatever is filling the storage has to be sustainable for the environment. Our best value in the plan this time round is groundwater, which is itself a form of storage because the water is in an aquifer under the ground and will be delivering by 2030. In our plan for Yorkshire, the best option for customers is groundwater. It is not that we do not consider all options, including water reuse, mine water, and transfers. We have three large projects in Yorkshire that are strategic resource options. One of them is looking at a big transfer from Northumbrian Water into Yorkshire. In the next planning round we will be looking at all options again, which will include reservoirs. They just take longer to deliver so, for us, groundwater is the right thing in this plan.

Doug Clarke: I agree that storage is incredibly useful. As a water resources person, I would always welcome more storage but not just as a drought measure. There are opportunities, if done properly, to look at how it can prevent flooding as well. There are multiple benefits to that. However, they take a lot of time to build and will not necessarily be the answer across the whole of the region. We need to look at some other solutions such as aqua recharge, water recycling, and licence capping on the basis of finding the best environmental outcome to deliver the resources that we need at the right cost for customers. It is looking at how you can balance all those across the piece, like Geoff said. We costed up these options for our WRMP, so we can provide some examples of the differences for those options that we selected. We have a mix of new reservoirs and new sources of water within our plan, so we can demonstrate those.

Lord Layard: I would be very grateful if you could all send us some of these estimates. We have been given the figure of £48 billion for what is involved in the latest review. These are huge sums of money. It would be really helpful for us to get to grips with whether this is real value for money.

Doug Clarke: The impact on customers also needs to be considered with those. Historically, our run rate was around £8 billion in the Severn Trent region. This time it is going to be £15 billion in terms of investment over the next five years. When balancing all these solutions, it is looking at the timing of when some interventions come in and the level of resilience that you want to get to ensure that customers are protected as well.

Lord Layard: Is it correct to say that customers will pay for all this?

Doug Clarke: It is a mix. It comes from the income we get from customers, the borrowing that we do, and the investment from shareholders. So it is a combination of all three that funds the investment.

Q139 Earl Russell: I declare my interest as a non-exec director and board member of The Water Retail Company. I heard you refer a couple times to desalinisation as an option. Desalinisation is so energy intensive that I find it hard to believe that it is anything other than a last resort. Putting more money into repairing the networks would obviously come first. Are you able to provide cost-benefit analysis in relation to that?

Geoff Darch: Desalination is an expensive option. It is probably the most expensive option that we have available but, because we are looking at the challenges associated with water quality and things like final effluent, the cost does not always have much of a premium over that.

As I mentioned, there are certain industrial uses of water—for example, hydrogen production where desalinated water, or at least a membrane pass through water, would be ideal feedstock. It is expensive. It is probably 10 times the energy consumption of groundwater sources, which are the easiest to treat. Clearly, we would need to do that in a net zero way but there is obviously pressure on that when looking at the UK economy as a whole. We very much have to weigh up whether it is the right thing to do. Is it reservoirs or other supply solutions, or do we do more on the demand side?

The Chair: We may pick up on that later. May I move to Lord Trees?

Q140 Lord Trees: My question is about the drought permitting system that you have at your potential disposal, but you have to apply to the Environment Agency for that. Our notes suggest there can be quite considerable delays in getting those permits; could you please comment on that? Anglian Water apparently recommended developing an on-the-shelf prior approval system ready to go; could you tell us a bit more about that, please?

Geoff Darch: I will probably leave the detailed questions on the permit experience to Deborah. The whole premise of a drought plan is to set out in advance how a drought will unfold, or how we expect it to unfold, and how we will respond to it. That includes the use of drought permits.

When we create these drought plans, they go through a very rigorous review with the Environment Agency but are also subject to public consultation. In theory, once a drought plan is agreed and signed off by the Secretary of State, it should be the plan that all parties are agreeable to. To my mind, if the conditions are then met in a drought, and the exceptional shortage of rainfall is normally the qualifying test, then why do we need to go through another rigorous process that can add a lot of time and start threatening public water supplies? It would be more sensible to emphasise the role of the drought plan than to manage reactively in a crisis.

The other thing I would add is that permits are just one regulatory mechanism for ensuring we have sufficient water. There are actually other ways to do this. For example, we could have a more dynamic abstraction management system. We could abstract more water when there is more water available, which we are currently not allowed to do because of the conditions of our licence.

There could be greater trading between sectors. We recently tried to trade a bit of spare licence that an energy company had. It was within the overall total licence volume but the Environment Agency objected because it felt it would be a deterioration under the Water Framework Directive regulations. There is some potential for regulatory reform so that we can manage the resources we have in a much smarter way.

Lord Trees: Any comments from anyone else?

Deborah Feldhaus: We are probably fairly unique in Yorkshire in that we have more options for permits than any other company because of the number of reservoirs we have; we have 120. Last year the Environment Agency processed 46 permits and 44 of them were ours. We have a lot of experience in this and have been working very hard with the Environment Agency post-2022 to streamline the process. It is constrained by legislation and the rules to an extent.

We started the pre-application process, which is lengthy in itself, at the end of May last year before a drought status was declared in Yorkshire and well before the hosepipe ban. We got our first permit in August. It takes a long time, given that the basic information approved in the drought plan was already there. We could do a lot to improve that process; it is difficult to resource.

The Environment Agency was unable to process the permits in parallel. That is one reason why the whole process was quite protracted and, because droughts are spatially different, we must have an option for every reservoir cascade system that we have just in case it is drier in one part of the region than another. All those options are already pre-approved through the process Geoff has described. I would also welcome some flexibility. The White Paper referred to constrained discretion around the ability to do things on abstraction or trading, as Geoff has also referred to. Certainly, the permit process needs revamping.

Doug Clarke: I absolutely agree with everything said. The process is too lengthy, too complicated, and it is too risk-averse. That applies both to drought permitting and normal permitting. Even a variation on an existing permit can take 12 to 18 months at a minimum, so the time taken to process these things is becoming a barrier to trading and opportunities. If you put that in a drought context, if it is taking this long in a non-emergency time then it needs to be much quicker to support in drought.

We also need to look at simplifying processes around winter drought permits. We have one to support refill should we need it on one of our reservoirs. We did not have to use it last year but it is a much lower risk opportunity and could be made much simpler and quicker both for ourselves and the Environment Agency.

The Chair: I am going to move on to short supplementaries; please keep your questions and answers short.

Earl Russell: My questions really are supplementaries to Lord Trees’s questions. What means and measures do you go through to ensure that environmental harm from drought permits is kept to an absolute minimum?

Doug Clarke: For each drought permit that goes in, we produce what is called an environmental assessment report. That assesses any risks or potential harm that could come about from the changing conditions of a drought permit. The permit then sets out all the conditions, the monitoring, and the mitigation measures that we need to do. They are very strictly controlled in the same way normal permits are.

Deborah Feldhaus: We have a rigorous environmental monitoring plan, which happens before, during and after you implement the permit. Permits that were implemented last year will have three years’ ongoing monitoring for environmental features in the environmental monitoring plan. That is done by independent consultants and aquatic ecologists. It is prior agreed with the Environment Agency and Natural England, if it is a designated site.

I am pleased to say that we have had good recovery in Yorkshire and, at the moment, have not seen any impact from the drought permits we implemented but, obviously, we will keep that process of monitoring for three years after the event.

Geoff Darch: It is a similar process for us. One thing I would emphasise is the cost. Even though we did not need a drought permit last year, we still spent over £1 million on monitoring in case it was required. These are quite onerous requirements.

Earl Russell: I know there are a number of supplementaries. I note the need for you to look at combined effects, the quality of the data sets that you apply, and the processes you need to go through particularly in relation to non-essential use bans.

Lord Ashcombe: I was horrified when I heard what Deborah said about the permitting process going from March until August. Presumably, there is a real possibility that the situation could have deteriorated very significantly in that time, and you may have needed an even stronger permit to do whatever you needed to do. The system does not really work.

Deborah Feldhaus: It would be manageable if your company had a handful of permits but when you have as many as us it is very tough, and for the regional Environment Agency as well. Just to say, it was the end of May when we started the pre-application process. We agreed with the agency to start it early, which actually helped; otherwise it could have been pushed further out.

We are working very closely with the Environment Agency. It recognises that the process is difficult for it and us and ultimately results in environmental risk. We are very keen to do demand measures first; that must happen before you go to the environment for water, but we do not want reservoirs to run out so it is important that the flows are maintained for as long as possible.

Lord Lennie: What is this process? What happens between May and August?

Deborah Feldhaus: We are asked to review the environment at the time. It takes three to four weeks for a group to check on the current environment, and then there are legal and various application checks made by the Environment Agency that take another two weeks. The determination, which is the final check before the permit is written, takes another two weeks.

Lord Ashcombe: Do you think the regulations are fit for purpose?

Deborah Feldhaus: A lot has changed since they were put in place; it is a more digital world. Some complexities are around having to physically deliver letters or bundles to post offices. It feels like it is no longer fit for purpose in the current environment and to have some change would be welcomed.

Q141 Earl of Leicester: To declare my interest, I am a relatively large-scale farmer in Norfolk. We abstract water from boreholes, primarily winter extraction from rivers, and do a lot of rainwater capture.

This is nonsense. You are all being quite diplomatic. The Environment Agency seems to be pretty useless on this front. It sounds like you know what you are doing but have to do a month’s-worth of monitoring to prove to the Environment Agency what is happening. Clearly the Environment Agency must know that you, as water companies, are doing that monitoring. It must trust you to have done the job correctly. Does it ever find fault in your applications for drought permits?

Deborah Feldhaus: At the moment, things are usually relatively minor because we have shelf-ready copies. We spent quite a lot of time between 2022 and this drought refining our drought permits and improving the quality of them. You have to demonstrate an exceptional shortage of rain. That is the test for putting a permit in place. We must do that, and the Environment Agency needs it from us. We also have to demonstrate that our demand reduction measures have been effective, so that means temporary use bans this time around. In the warm weather, we were very thankful for what customers did for us. Demand went down by 10% in the warmest weather. But, again, we waited two weeks to get the evidence to give to the Environment Agency, whereas now, with modern techniques and technology, we could see straightaway that demand had dropped. There is modernisation we would want to go through, in conjunction with regulators, to make sure it is happy that we are protecting the environment and compliant but, at the same time, providing evidence quicker and doing it in a much more efficient way.

I would also like to say that it does checks on our compliance with new permits, because the drought permit is temporary. It did over 30 checks last year and we were compliant with all our permit conditions. There is a lot of interaction between us over the process.

Doug Clarke: I feel that the Environment Agency is constrained by the process and legislation that is there, which causes some problems. That is why it needs a review. I think there is recognition in the agency that it is not working as well. As Deborah says, there needs to be a simplification of the process to bring it more up to date to allow an agile and faster response. There also needs to be some consideration of the existing permitting conditions and how licences could be more flexible when the water is available or the opportunity is there to take the water. A fundamental update is required to that whole permitting process.

Earl of Leicester: Can you see light at the end of the tunnel or is it going to require legislation from Government?

Doug Clarke: It is going to require legislative change.

Earl of Leicester: Are the Government aware of this? They must be.

Geoff Darch: I think they are aware of it, but they need a push. We are seeing swings. We saw the drought in 2022 and then had the wettest 18 months on record with groundwater flooding in Norfolk—close to where you are—yet we were not allowed to abstract any more during that time. It just needs to be considered in light of the conditions that we are now experiencing and that we know we are going to experience in future. It needs to be a lot more dynamic in terms of what we are allowed to do—recognising that, in some places, abstraction can reduce groundwater flooding.

Q142 Lord Lennie: Do you think the Environment Agency agrees that legislative change is needed? I will leave that with you. My actual question is this: is enough being done to reduce water consumption, and do you see a role for year-round engagement with households and businesses on water demand, particularly messaging?

Geoff Darch: Yes, some parts of the Environment Agency would agree to your first question, but they need the air cover that legislation would give them. That is the dilemma that they are in.

On the consumption point, we are seeing a lot of benefits from smart metering. I mentioned continuous flows earlier, but the consumption levels on smart metering are something like 50 litres less per person per day than our unmeasured customers. They are having a really significant effect on consumption, including peak consumption. Our peak demand in 2025 was a lot less than it was in 2022 because of the way that the smart meter customers were behaving. Obviously, we can and do give them data about that, but it is also about what the smart data enables. We have an app that we can interact with customers on, and we can give them information about how their consumption varies with that of other typical consumers within their area. So it becomes a really useful platform.

The other thing we have done over the last two summers is what we call a summer tariff trial. We have increased the price of water marginally for some customers in summer and reduced it in winter. It did not have much of an effect in 2024, which was a fairly average summer, but last year it did. So we can start to work with our customers, enabled by the data that we are getting through smart meters, to manage the system and manage demand in a much more sensible way. We need the Government and local authorities to play their part in this, though. The Government really need to push on with the mandatory water efficiency labelling scheme, which has been promised for a long time. Local authorities have an important role to play in terms of the level of water efficiency that goes into new homes.

Doug Clarke: Just to build on that, there is more opportunity and more that could be done. Part of it is the non-household and household levels of demand management, and there need to be greater obligations and duties on retailers and non-household customers to engage. Obviously, as wholesalers, we do not have that same direct relationship any more, so more could be done in that area.

Like Geoff, we are also looking at tariff trials, but obviously the key enabler for tariff trials is full smart metering across all areas—without that, you could not offer the same opportunity to all customers. The Government need to push harder and faster. The mandatory water efficiency label has been batted around for about 10 years, maybe more. I remember being in discussions about that a long time ago, and we are still not there yet. We factored that into our WRMPs and assumed it would have been put in in 2024, because we were mandated and told that we had to do it. We asked in 2026, and we are still not there. The key with that is that it has to ensure the correct minimum standards. If the right minimum standards are not there, it will make no difference whatsoever. There is also a need for greater and tougher assessment of new developments and local authorities, and Government playing their part to ensure that new developments are more efficient, be that through reuse or by applying the standards. There is a lot that could be done to help customers.

Lord Lennie: Is it slightly perverse to have a system of metering that reduces demand, which therefore reduces the income profits, et cetera, of the shareholders and so on, as a water company?

Geoff Darch: There are balances in that within each five-year period, so you are right, and it is an opportunity for customers to save money, for sure. But overall, there is a revenue cap and a revenue cap system which ensures that companies’ costs are covered.

Q143 Lord Krebs: In some written evidence, environmental NGOs and others have argued that temporary use bans and non-essential use bans are not implemented soon enough. What is your view of the use of those instruments in a preventive way rather than a reactive way?

Geoff Darch: The simple message is that we follow our drought plan. For example, we have trigger levels on our reservoirs that indicate the point at which we would need to apply a temporary use ban or a non-essential use ban. If we do not reach those levels, then we will not apply the ban; it is as simple as that.

Some of the frustration comes from the fact that the public water supply system has invested and is continuing to invest quite heavily in the standard of resilience. For example, we heard earlier about one in 200 moving to one in 500. That means we have an asymmetry between the level of resilience that the public water supply system has and, say, that of the agricultural system or the environment. So we end up with situations such as in our region last summer where the environment was potentially being impacted and agriculture was being affected, yet people were still able to use their hosepipes. As I said earlier, you do not need temporary use bans to achieve reductions in demand. We saw pretty much the same impact as a temporary use ban in the smart meter rollout.

Deborah Feldhaus: We implemented a temporary use ban this year for exactly the same reasons. We followed our drought plan and met the triggers. We have a level of service for temporary use bans of once every 25 years. When we met those triggers, we put the temporary use ban on a few days earlier than the actual trigger, but that was because, when we looked at the weather, it was warm and that was the right thing to do. That has to come on before we do our drought permits; it is something that we must do in our drought plan before we even enter into conversations about changing any of the permits and taking more or reducing what we put into the environment.

We also reviewed the non-essential use ban process. It probably needs more guidance because it is based on cost-benefit, and when you actually do the analysis according to the code of practice, there are very few circumstances where it is cost-beneficial. It is not a lot of water that is saved, and the cost to businesses is quite high. We never got to the point of having to do a drought order for non-essential use bans as it probably would not have met the criteria for approval and we would have had a lot of objections because it would not have stood up. We were in conversation with the agency over the summer and we kept repeating the exercise with different scenarios to see if it was the right thing to do. It never stood up in terms of cost-benefit, so we did not apply for a non-essential use ban.

Lord Krebs: In that cost-benefit analysis, do you include the cost to the environment, or is it simply the cost to businesses?

Deborah Feldhaus: I would have to check because it is quite a complex economic assessment. I can certainly get that to you, but I think it is mainly the cost to businesses.

Lord Krebs: As I see it, there is a tension between supplying water for domestic and commercial users versus supplying water to protect the environment. The environmental NGOs would probably say, “Well you’re not weighing the cost of the damage to the environment sufficiently heavily, so you are putting too much emphasis on domestic and commercial users and not enough on protecting the environment”.

Deborah Feldhaus: Yes. In that case, the code of practice would have to be changed and the guidance modified to change the balance of when you implement based on cost-benefit. For Yorkshire, the saving was a very small percentage of water, and it works on how many days of the level 4 restrictions that I referred to earlier are avoided by doing this specific option.

Lord Krebs: Doug, is there anything you wish to add?

Doug Clarke: No, I do not think I have anything to add on that one.

Lord Krebs: I will just loop back very briefly, if I may. We have heard several times during this session about smart metering. Is smart metering or metering at all entirely voluntary? There is no mandatory requirement for everybody to have a smart meter.

Geoff Darch: We are rolling it out so that anyone who currently has a normal meter will be switched to a smart meter.

Lord Krebs: What about people who do not have a normal meter?

Geoff Darch: If people do not have a normal meter, we are now looking to install meters where it is cost-effective to do so.

Lord Krebs: It is not a legal requirement. The Government have not said everybody should be metered.

Geoff Darch: No. There are some practical issues with getting to 100% metering. For example, it is a little more complex with blocks of flats, but one of the things we saw with the increase in water prices in April last year is a record number of people asking for a meter for the first time.

Lord Krebs: Is mandatory metering standard in other northern European countries?

Geoff Darch: It is. We have 91% of our customers metered on the household side and 99.5% on the non-household side, which is pretty high. If it were to be mandated you would have to look at the cost, because you are probably talking hundreds per property, if not low thousands of pounds, where it is more complex.

Q144 The Chair: I just have a quick follow-up on the messaging question that Lord Lennie asked. It is quite difficult to ask the public to use less and less water and fix the leaks in their households when they see in the public domain some fairly major examples of water gushing out and being wasted. The industry has a target, I believe, of 2030 to reduce leakage by 20% from a 2017 baseline. I do not think that is on target. I hear what you say about the costs becoming more and more but there is that target. From your perspectives, is the water industry going to meet it?

Doug Clarke: In terms of leakage progression, Severn Trent Water is probably a couple of years ahead of where it should be at this point. It is very much pushing towards that target of being where we need to be by 2030. You are correct: there are some companies across the sector that are likely to fall short on that.

The Chair: It would be very difficult for the water company in Kent, for example, to ask its householders to reduce use. Is there a great deal more that some water companies can be doing?

Doug Clarke: Especially in drought periods, looking at that discretionary use and the additional use above the norm is the key to target, because that creates the peaks in demand that we see during those periods and increases the level of use. It is the sort of thing that a temporary use ban is there to combat. It is about trying to cut down some of that discretionary use as well, and metering will help with that.

The Chair: What is the perspective of Yorkshire Water and Anglian Water?

Deborah Feldhaus: In Yorkshire, we achieved a 15% reduction in leakage in the last AMP and we were one of, I think, only four to do so. We are on track to do just over 12% by 2030. It has been a difficult year. We spoke earlier about the natural rate of rise. In a year where you have very high soil moisture deficit, we have to do more to keep standing still, so it is going to be a tough year.

The Chair: Are you going to meet the 2030 deadline?

Deborah Feldhaus: Yes. We are on track to meet that. On the issue of trust and customers, it needs an integrated approach. Customers need to see us achieving what we say we will if we are going to ask them to reduce demand. But there are also other organisations—government and independent organisations such as Waterwise—that help to keep the messaging right. We also need to work with schools. At the moment it is not on the national curriculum. Perhaps water efficiency should be and that is something we could consider doing.

Geoff Darch: There is a risk that we will not meet the target, partly because we have struggled to convince Ofwat that investing in large-scale mains renewal is the way to go. We believe it is and we proposed a package of what we call climate vulnerable mains renewal as part of the last price review, but Ofwat rejected it. As a company that is leaking only around 12% from our own network, it is harder and harder to go lower and mains renewal is going to be one of the key factors, but we have to be funded to do that.

The Chair: Deborah Feldhaus, you mentioned that a lot of the leakage is estimates, but obviously not in the households that are metered. Is it really the case that hard data on leakage is not available?

Deborah Feldhaus: It is available; it is a complex calculation. It considers what we can measure, and then there is unaccounted-for water that is not measured. In Yorkshire, we have about 65% of customers metered. We have a proportion of unmeasured properties that we monitor as well, and the calculation is built up from a number of things.

The Chair: Do other countries have access to this data more readily?

Deborah Feldhaus: If they have better coverage or penetration of meters, they would understand where the water was going better, so the calculation could have more certainty in it.

The Chair: Are there new technologies that could help, for example lidar? We read in some evidence that places such as Arizona are putting in place new technologies that really help them see exactly where and what the problem is.

Geoff Darch: We use a variety of techniques from leak detection dogs all the way up to satellites that can monitor—

The Chair: You are satisfied that you are up to speed and that your technological access is adequate.

Geoff Darch: Yes.

Q145 Baroness Whitaker: I will ask more about the part played by the Environment Agency. We had some evidence that the industry thinks the draft guidance is not sufficient and I believe Anglian Water suggested an industry-wide framework should be delivered collaboratively. I would like to know what your assessment is of the Environment Agency’s guidance as it affects your areas. In particular, we had evidence that the Government lack a vision for which non-household units should be prioritised, so can you tell me how you are currently expected to prioritise non-household use?

Geoff Darch: I will specifically refer to the Environment Agency’s guidance on emergency drought plans rather than its general guidance on drought plans. We welcome that the Environment Agency has now published this guidance. It came out earlier this month.

From our initial look at it, one of the things we are concerned about is that it appears to underplay the significance of what will be an emergency situation that we are expecting to occur only once every 200 years or potentially once every 500 years. We need to imagine what that kind of event would actually look like. It would not just be an incredibly dry time; we would also be facing heatwaves. There would probably be significant wildfires, as we saw in 2022 and again this year. Public health would be an absolutely critical factor. The guidance needs to take more of a framework that looks at how all the organisations would have to lean into and help through that situation. There is a lot in the guidance at the moment about how the water company needs to do X, Y and Z, and the water company would absolutely have an critical role to play, including in things like bottled water provision for vulnerable customers, but there are an awful lot of things that central government, local authorities, public health bodies and others would need to do in that situation. We would like to see a much clearer overall framework and understand how we, as water companies, can input into it, because it would be a very significant event.

On your second question around non-household users, there is some guidance at the moment under the Security and Emergency Measures Direction around supporting different category levels of customers. But we would like to see a much clearer direction from government around which customers, and potentially which locations, would be the most important to protect because at the moment it seems that a lot is being lumped into that. We know that hard choices would have to be made in that situation.

Baroness Whitaker: Which locations against which criteria?

Geoff Darch: You could be looking at supporting power stations which have criticality, hospitals, schools, prisons and so on. They are potential things, but we need to look in the round at what we need to support.

Deborah Feldhaus: We did quite a lot of work with Defra and the Environment Agency on emergency planning this time around just to refine the plan and we equally welcome the guidance that we have just received. There is clarity on triggers and other things that have been very helpful. There is a section where they are asking what support the Government could give us in this arena, which will allow us to develop the guidance further with collaboration.

On the non-household element, we do not have a clear priority on how we would prioritise non-households in the event of emergency planning. At the workshops that were held during the summer, Defra said it would look at helping us do that prioritisation exercise that we would need in order to make those decisions on a risk-based approach. We have certainly been much closer to Category 1 and 2 responders through the local resilience forums as a result of all the work over the summer because, as Geoff said, they are a really critical part of the emergency planning process. This is really beyond drought plans and into emergencies.

Doug Clarke: We welcome the guidance and, like others, we are involved in its development. It needs to be clearer and more realistic about the responsibilities of other sectors because, as Geoff and Deborah both stated, at level 4 we are talking about the stage of potential rotor cuts, standpipes and effectively getting to the point of day zero and running out of water. We need to be clear on the roles and responsibilities of those other agencies. I know Defra is looking at doing its own exercises to understand what the Government’s response could be around this, and it has said that it would give us further guidance on how we can apply this in the future and how that might then shape updates to this guidance.

Just to pick up on the non-household point, similar to Anglian Water, we have responsibilities under the SEMD, the Security and Emergency Measures Direction, to provide to vulnerable non-households—hospitals and so on—so those are the ones we would prioritise in this, obviously alongside domestic customers.

Baroness Whitaker: You have all talked about the emergency guidance. For the rest of the guidance, is there anything you would like to comment on?

Doug Clarke: Within the broader guidance, looking again at the whole permitting process that sits behind it would be one of my key target areas.

Baroness Whitaker: I assume that you all think that revisions and new guidance should be developed collaboratively with the industry?

Doug Clarke: Yes.

Geoff Darch: Yes.

Deborah Feldhaus: Potentially other sectors as well.

Baroness Whitaker: And it should be with all stakeholders.

Deborah Feldhaus: Yes.

Doug Clarke: Yes.

Geoff Darch: Yes.

Baroness Whitaker: That makes it longer in coming out, of course.

Q146 Lord Rooker: You have covered the question that I was down to ask, but I want to put it in a bald way. When priorities are required for non-household uses, are you seriously implying that it is better that politicians make the decision rather than the water companies or the regulators?

Doug Clarke: No, I do not necessarily think it is politicians who need to make the decisions, but ensuring that the legislation set out by Parliament is fit for purpose and allows both us and the regulators to operate in the right way protects both customers and the environment. The politicians and the Government need to support us through updates to this legislation.

Lord Rooker: Okay, that is helpful. I should have declared, by the way, that I live in Ludlow and I have a rainwater harvesting system of 4,000 litres which I put in 20 years ago. I want to follow up what Lord Krebs asked about smart meters, because I am completely ignorant. I have a hole in the pavement along with a flap, like everybody else, and there is a meter down there that presumably occasionally gets read, bearing in mind I am not using as much as I would usually. How does the smart meter work? Presumably it is in the kitchen or in the house for the customer to see, as the purpose of it is to cut back their usage. How is the connection made between what is a mechanical meter, unlike an electricity meter, and the smart meter? What amount of work is involved in installing it?

Geoff Darch: It is quite a significant amount of work. They work differently from energy smart meters. For example, we do not have a screen in a kitchen. We make the information available to customers via an app or a website, and we give them the information up to the end of the previous day. The way it works is that the smart meter integrates with the existing mechanical meter and sends a signal every hour. We have installed a private radio network to communicate that, and then it comes back to us and we can issue it to customers. It is a different way; to some extent we have learned from the way that energy smart meters have done it, but it is trying to get a much more dynamic understanding of flow so customers can get and have that hourly data.

Q147 Lord Mancroft: Water quality is obviously negatively impacted by drought. What effect does that have on water supply and treatment costs, and how should these challenges be addressed?

Doug Clarke: Yes, absolutely, water quality is impacted by drought, especially for reservoirs. As reservoir levels drop, the water quality within their lower levels can be different. As Geoff alluded to earlier, we are seeing similar issues with the winter recharge in terms of the water quality that we are now seeing for refilling some of our reservoirs and sources. It is important to stress, though, that dealing with variable water quality is BAU for water companies that have any direct river or reservoir abstraction because of the impacts of catchment run-off, pollution events and everything else. So our processes are very robust and capable, and they deal with these things.

As we see more variation in water quality, the challenge is that that will increase costs in terms of treatment and pumping, if we are looking at alternative sources. Importantly, when it comes to trading and inter-catchment transfers, there are other factors that we need to consider such as invasive non-native species that can move between those catchments when we are doing the water transfers. So the challenges of water quality effectively increase the cost of delivering supplies to customers.

Deborah Feldhaus: Certainly in Yorkshire, we see an increase in colour in all the reservoirs that we have to treat, generally after dry spells. There are various ways of dealing with that and we have been doing it for a long time, because this was first very evident after 1995. Catchment restoration and all the measures that you can put in to make a catchment more resilient to climate change are really helpful in reducing those trends over time, so we are doing that at the same time as monitoring. If we then get to a point where we can no longer treat what is coming in from the catchment, then there are resin-based technologies we use in Yorkshire to tackle very high colour, but they are expensive.

So there is the cost of a long-term trend increase and then, in summers like we have had this year, we may get increased algal blooms that lead to taste and odour. On this specific question, we spent about an extra £150,000 this year at one of our sites to treat that taste and odour to make sure that the water was still acceptable to customers, so it definitely does impact. We also see nitrates increasing a little in groundwater, though, having said that, we have not really had an impact this summer with groundwater in Yorkshire.

Geoff Darch: It is a similar picture for us in terms of raw water quality and algal bloom risks. This essentially increases the costs; we have to do extra backwashing of filters and things like that, and it can reduce the throughput of works.

In terms of where we go with this, these trends are consistent with what we are expecting under climate change so we believe this is not a blip; it is something that we are likely to see going forward. We really have to get into catchment solutions because, yes, we can do more of that end-of-pipe treatment, but it is expensive and we have to dispose of the waste, which often itself requires dilution. But we have to start looking at where the nitrates are emerging within the catchment, for example, and what we can do to reduce that getting into the waterways in the first place.

The approach is likely to be strengthened through the White Paper in terms of regional planning, but catchment planning is also very much welcome. We need to get all stakeholders in a catchment together to look holistically at the solutions.

The Chair: That makes sense. The White Paper mentions the Severn Trent catchment management scheme as an exemplar, so congratulations.

Lord Trees: Geoff, you mentioned nitrate pollution earlier, and you have just mentioned algal bloom. Is the water that you abstract from aquifers inherently less polluted by virtue of all the filtration and so on that has happened naturally? Is it, as it were, inherently cleaner than a catchment in a reservoir might be?

Geoff Darch: Yes, in general it is. We can have pollution issues in groundwater, partly due to historic applications of pesticides and nutrients. We are also seeing some groundwater sources polluted by PFAS—these forever chemicals—but generally groundwater is a lot better than surface water.

Earl Russell: I have a very brief supplementary on nitrates as well. I am just trying to understand the relationship between floods, drought and nitrate pollution. You seem to be suggesting that it is during periods of drought that you are getting nitrate pollution. Is that because you are having to take water from boreholes where nitrates have permeated during flood conditions, and then you are having to abstract?

Geoff Darch: It is more on the surface water side. We think it is because both in 2022 and 2025 we had record soil moisture deficits, so we are exposing more of the soil. And then, when the rains come, it seems to leach out the nutrients into the environment. One thing we are not yet clear on and are investigating at the moment is how much of it is an in-year issue versus a legacy issue. It could be that nutrients applied decades ago are now finding their way into the water environment.

Earl Russell: Is that something you are going to do more research on?

Geoff Darch: Yes.

The Chair: Excellent. I will come to Lord Krebs and Lord Ashcombe, and then the Earl of Leicester will have the final word from members of the committee. But then I will come to each of the panellists to ask for your input into the Government’s White Paper as they flesh out the details in the transition plan in the coming months.

Q148 Lord Krebs: My supplementary question actually relates to the White Paper. I just wanted to seek your clarification on a point. It links to pollution. Some of the pollution comes from sewage into rivers. The White Paper says that Defra will work “with MHCLG to ensure the right to connect for water supply” and “the sewerage system supports and enables the Government’s housing delivery objectives”. From your perspective, am I to understand that means that you have no say in whether a new development of 10,000 homes is entitled to both draw water to drink and produce sewage for you to treat?

Geoff Darch: That is correct; at present we are only an advisory, not a statutory, stakeholder. Some local authorities will take our advice and uphold that; others we have seen, including quite recently, ignore that advice.

Lord Krebs: I should say I live in Oxford, and the River Thames suffers quite a lot from sewage discharge by Thames Water. Yet the local planning authorities are building, or allowing the build of, a huge number of new homes in and around Oxford. Presumably that will make life tougher for Thames Water.

Geoff Darch: Absolutely, yes.

Q149 Lord Ashcombe: It is appropriate you are here on a wet day. The $1 million question is, are we going to be facing drought next year, or are the various aquifers, reservoirs and so on filling sufficiently at the moment, in your opinion?

Doug Clarke: Yes, we regularly meet with the agency through the National Drought Group, and all companies submitted their prospects reports in early January. The current position is looking fairly positive for most companies should we see a normal winter—by normal, I mean 100% of long-term average rainfall—so most companies are on track to recover through that winter. It is around that recovery period for the winter rainfall now, and most companies are on track.

Lord Ashcombe: Is it looking pretty positive?

Doug Clarke: It is looking positive at the moment, yes.

Q150 Earl of Leicester: Very quickly, going back to recharging the aquifers, it is not yet happening as you are thinking about how to do it, I presume because surface water invariably in the winter, when there is plenty of it, is dirtier. As you will not want to contaminate the aquifers, will you have to treat that water before pumping it in?

Doug Clarke: Yes, absolutely. The investigations we are looking at now are looking at exactly that: what we need to do in terms of the standards to be treating that water, to put it in, and how that would be done in a way that is not going to cause any deterioration in those aquifers in the long term. That is exactly correct.

Geoff Darch: We abandoned our potential scheme because we were going to end up having to treat the water to inject it and then treat it again once it came out, and it was just too expensive. So we are now looking more at how we can encourage infiltration in catchments more generally.

Deborah Feldhaus: Similarly in Yorkshire, we did a pilot and we had to treat the water before it was injected into the ground, then treat it again when it came out.

Earl of Leicester: Geoff, would those be nature-based solutions?

Geoff Darch: Exactly, yes.

Q151 The Chair: On nature-based and common-sense solutions, I have a question for you, Geoff Darch. We heard about the Felixstowe Hydrocycle, where, instead of letting water from—I think—the River Stour flow out into the ocean and then trying to reclaim it, we can use the Felixstowe Hydrocycle model and reuse it before it goes out to sea. Is that correct?

Geoff Darch: Yes, that makes a lot of sense, and there is some geography that works really well there. But we would like to see that kind of mechanism applied much more broadly, including in Norfolk, because we would then retain the water and it would filter down ultimately into the ground, which will benefit everyone.

The Chair: Is that sort of system commonplace?

Geoff Darch: Not that much; the Felixstowe Hydrocycle study has been a real pioneer. We would like to see that applied a lot more generally and, certainly working with Water Resources East, we are now looking at how we can scale up those kinds of schemes.

The Chair: Are they cost effective?

Geoff Darch: Yes, absolutely.

Doug Clarke: It is not necessarily on the water resources side, but we have employed some of those tactics and increased infiltration to help with flooding. We have done a huge amount of work in our Mansfield area to allow greater infiltration, creating infiltration basins to help with surface flooding issues and managing that water sustainably. We are looking at how that can then ultimately support on the groundwater side as well.

The Chair: So there is real scope for ramping up sensible solutions like that. Can I come to each of you for just 30 seconds or a minute to say what you would like to see taken forward in the White Paper?

Geoff Darch: We really welcome the White Paper. It is a milestone moment for the water sector. There is a lot of really good content in there. We were pleased to see the commitment to ensuring the investability of the solutions and, indeed, companies. That needs to happen to ensure that we have the right balance going forward.

There are a few particular things to pull out. First, there is the importance of resilience; we know we need to invest in resilience, particularly in the context of drought. That is not just about some of the important big new things, but also about ensuring the assets are in good condition and that we are renewing assets at an appropriate event [1], for example.

The final thing I would say is the importance of really strengthening regional and catchment planning, which was referenced in the White Paper. Water Resources East is a really good model for that; it integrates stakeholders to look at creating joint plans. We can probably do more on the drought side, as well as looking at and helping to co-ordinate catchment activity. As a company, we are now adopting the catchment-based approach in terms of how we create our long-term water resource management plans, but also our drainage and wastewater management plans, to get that integrated, holistic view.

Deborah Feldhaus: We welcome the commitment to changing delivery at pace and look forward to hearing a bit more about the transition plan and the dates for that, hoping they are earlier in 2026 rather than later. We also very much welcome the focus on asset health and resilience overall, and that one of the pillars was water security, which is clearly key to the discussion today. Also, there is an appetite for changes to legislation and a more bespoke way of working with companies that works on their specific performance and moves that forward in a way that is balanced for customers and the environment.

Doug Clarke: We welcome the paper. One of the key things is ensuring there is focus on the right measures that are going to deliver the greatest benefit rather than possibly spreading it too thinly. That would be a good piece of guidance.

The Chair: We would love to hear more details about the measures that you think should be prioritised.

Doug Clarke: We can certainly provide some supplements on that. Just to pick up on the others, there is asset health, resilience standards—that is a key one—and a review of licensing and the application of the Water Framework Directive. There is scope for renewal there.

The Chair: With that, we will call the session to an end, but please write to the committee if there is any evidence that you feel we would benefit from receiving. With that, a huge thank you to all three of our panel of witnesses today.