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Price review 2009
PR09/13 TO ALL REGULATORY DIRECTORS OF 20 June 2008 SEWERAGE SYSTEM DESIGN AND CLIMATE CHANGE Executive summary We expect each company to design its public sewerage system to deliver best value for consumers over the long term. This letter sets out additional guidance on how we expect each company to do this. We recognise that each company will have made assumptions in preparation for its draft business plan. Each company should explain how far it is incorporating the guidance we set out here in its draft business plan and indicate where, in the light of this guidance, further changes will be necessary for its final business plan. Evidence on climate change points to increasing rainfall intensity, and we think companies should take this into account in the design of new assets. In the absence of more accurate guidance companies should take account of increasing rainfall intensity in line with Defra's guidance on climate change1 in planning and designing public sewerage systems. Each company should assess whether it is beneficial to future proof new assets rather than replace or amend assets early. This may mean precautionary asset design for the future climate or allowing flexibility so that assets can easily be upgraded. There are clearly limits on the capacity of public sewerage systems to drain storm water in all circumstances. We expect each company to play its part in delivering proposed Surface Water Management Plans. These plans should facilitate joint working including implementing sustainable drainage solutions and identifying exceedance flood routes, which are likely to be important elements in delivering service in line with consumers' preferences. Introduction In February we wrote to each sewerage company and requested information on its approach to drainage design standards for the public sewerage system. We engaged Atkins to review the responses and make recommendations. We have put its report, Development of guidance for sewerage undertakers on the implementation of drainage standards, on our website. This letter provides guidance on the approach that we expect each company to take on design standards for public sewerage systems (including all relevant assets such as pumping stations) and how we expect them to allow for climate change. It also sets out our views on sustainable drainage solutions. It goes on to explain how we expect each company to take account of this for PR09, in investment that companies undertake to address growth and new development as well as to maintain base services. Existing guidance on new development and sewer flooding is outlined in Annex A. Approach to design standards and sewer flooding We recognise that consumers place a high value on reducing the risk from flooding from sewers. In the current five-year price review period to April 2010 we expect companies to invest over £1 billion to address the problem of sewer flooding. This is expected to deliver significant reductions in the number of properties that are at risk of flooding from sewers more than once in ten years. Companies will not be able to eliminate the risk from sewer flooding, especially with the likelihood that climate change will lead to more extreme rainfall events. It is important that companies understand the balance between the value that consumers place on the benefit of reduced risk from flooding with the costs that this incurs. We also expect each company to engage positively and creatively with the surface water management agenda, identifying and promoting wider measures to manage the demands being placed on sewerage networks. Over the long term this should become the dominant element of efforts to contain and reduce risks from sewer flooding. Currently our sewer flooding registers provide information on the properties judged to have a probability of flooding from sewers more frequently than once in 20 years. For each company we expect that there will be no net increase in the number of properties on these registers2. Certainly, design standards must be such that no sewer flooding occurs in storms with a return period of 1 in 20 year or less. We would only expect design standards less than this where costs are exorbitant so that the investment is clearly not cost beneficial. Consumers may desire a higher standard of protection from sewer flooding. We think that it is appropriate for companies to set out strategic aims for the protection from sewer flooding they aim to deliver in the long term. Companies did this in their strategic direction statements. For each company to achieve its stated aims it must design new assets in line with them. We therefore expect each company's flood protection design standards to be consistent with its strategic aims. These in turn should be consistent with consumers' preferences. Companies' design standards should encompass all relevant drainage system assets such as pumping stations. Companies should also consider whether they should assess assets in accordance with the guidance that we provided in PR09/12 – Asset resilience to flood hazards: development of an analytical framework. Each company should design new work so that it is at least in line with the strategic aim to prevent flooding from the public sewerage system, but properties should generally not benefit from an improved level of protection at the expense of reducing, to below this level, the protection enjoyed by others. Network effects should be taken into account to prevent adverse effects on flood protection. Current standards are commonly expressed as a probability of an event occurring, rather than risk. Risk, defined as probability times the consequence, takes account of the severity of consequences arising from an event. Companies must consider if there are particular circumstances that require a higher level of flood protection than its normal probability based design standard would provide. For instance, where a company identifies that sewer flooding is likely to affect a large number of properties it must consider whether the design standards should protect properties from more intense storms that have a lower probability of occurring. This is an example of where we expect companies to use cost benefit analysis in design standards. If companies set out strategic aims in terms of risk, rather than probability, it will help to avoid exceptions for extreme or unusual cases, which will otherwise be necessary. We consider that risk is a better basis for flood protection standards than probability alone. It is consistent with the risk-based approach we have asked companies to employ for asset planning. Companies' strategic aims for protection from sewer flooding should be aimed at the public sewerage system as a whole, not individual properties. We expect companies to continue to apply risk-based cost benefit analysis on all expenditure, including work to reduce identified sewer flooding problems or to reduce or manage flows into sewerage systems through upstream interventions. Each company must use judgement in the level of analysis that it undertakes, ensuring it is appropriate to the scale of investment. It must take into account social and environmental factors including the social cost of individual's distress and inconvenience resulting from flooding. Where a property has a known sewer flooding problem that is not cost beneficial to solve, the company should take a creative approach to identifying acceptable mitigation measures. Climate change For their business plans, we expect each company to have carried out sufficient climate change sensitivity analysis on investment decisions to identify those which are sensitive to potential changes from UKCIP08. In the absence of more accurate guidance each company should take account of increasing rainfall intensity in line with Defra's guidance on climate change3 in planning and designing public sewerage systems. This guidance contains indicative sensitivity ranges for peak rainfall intensity, along with guidance on their use in option appraisal. In planning new sewerage assets companies should use UKWIR's methodology for long term / least cost planning for wastewater supply-demand. This sets out that, where climate change is likely to affect a wastewater system during its asset life, it should be taken into account4. Whilst the supply demand balance is normally assessed over a planning horizon of around 25 years, it is important that climate change is taken into account over the entire asset life. Each company should conduct sensitivity analysis to assess how it should take climate change into account in selecting a cost beneficial solution. Each company should consider possible changes to the design to cope with the expected changes to climate over the next hundred years to provide a similar standard of protection from sewer flooding to customers in the future as now. Each company should consider options beyond modifying network infrastructure, such as sustainable drainage solutions or identifying potential overland flood conveyance routes. It should look at both precautionary and adaptive solutions, taking account of cost implications associated with each. Atkins' report5outlines a risk-based management framework that may be helpful for companies to consider. If a company assesses that it is beneficial to take account of future changes in climate it should use the UKWIR methodology to reappraise all feasible solutions with an appropriate allowance made for the future climate in target headroom or other design assumption. Particular care should be taken where the chosen solution is sensitive to longer duration storms. The benefits of the end solution must remain greater than the costs. For instance a planned cost beneficial asset may have an expected life time of 100 years, but be insufficient after 80 years if the climate changes as Defra have projected. A company should compare the NPV of upgrading or replacing the asset after 80 years, rather than designing the current solution to be ready for the future climate. If it finds that it will be cost beneficial to either precautionary design for the future climate now or provide flexibility so that it can be easily adapted later, it will need to revisit the feasible options and reselect the optimal solution. It may be possible for a company to demonstrate that instead of looking at each individual scheme it is cost beneficial for them to build all assets of a particular asset life and type, such as sewers, to cope with the expected future climate. We would expect to see evidence that this will lead to long term optimal cost beneficial solutions. UKCIP08 will provide new information on climate change. We expect companies to use latest information in investment planning where possible, although we recognise that it will be challenging for companies to digest this information and its consequences in time for final business plans Surface water management plans and sustainable drainage solutions Sewerage companies are not responsible for preventing all flooding events. Their duties include effectually draining properties connected to the public sewerage system. Effectual drainage does not extend to draining all properties from any potential rainfall event. As we stated in our response to Defra's consultation on improving surface water drainage, underground sewerage systems will always have a finite capacity, so there will always be a need to plan and manage 'exceedance'. Sewerage companies therefore need to work with other agencies in managing surface water. Joint working will encourage sustainable drainage that keeps surface water out of sewers where appropriate and possible, and overland flood routing for water that exceeds the public sewerage system. These are likely to be key components in delivering the protection from sewer flooding that is expected. Sewerage companies must play their part and we look forward to the development of a clear framework for Surface Water Management Plans. We expect expenditure on sustainable drainage solutions to be included in business plans where it is a best value solution for a sewerage undertaker to discharge its duties. This expenditure can be part of a joint solution with other stakeholders. We expect there to be arrangements in place for proportional sharing of costs that reflects the participating responsibilities. We will set price limits based on companies' business plans, but we recognise that companies may find better ways of delivering solutions during the period. Companies can deliver equivalent schemes as long as it can show that the new scheme will achieve the same or better results for customers. This could be through companies taking part in joint solutions that are best value for consumers. Demonstrating delivery to consumers We expect each company to be able to demonstrate to consumers and other stakeholders whether it is on track to meet its strategic aims. This may mean that companies will need to keep records on flooding in addition to the data they submit on sewer flooding registers. We will not request to see such data as a matter of course, but would expect it to be reliable, complete and accurate. We will also expect each company to verify that investment offers the level of flood protection targeted in the years following completion of schemes. Each company should carry out such verification in accordance with the significance of investment. Again, we will not expect companies to report such data as a matter of course, but will expect information that companies provide to be reliable, complete and accurate. PR09 Draft business plans In its draft business plan, each company should explain the extent that its proposals for the public sewerage system are in line with this guidance in its commentary to part B5 and cross-reference to this in part B3 where necessary. It should also set out if it intends to implement further changes for its final business plan. Each company must explain why it has chosen the flood protection standards that it has planned and how it has assessed that they are in line with consumers' priorities. It must clearly expose what evidence it has based its decisions on and the associated cost implications. We will need to be convinced that the evidence is sufficient to justify any increase in costs. Each company should also set out the assumptions it has made on climate change, how this affects solution selection and the associated expenditure implications. Each company must be clear how it has assessed the impact of climate change and what changes will result, ie what assets it plans to adapt and to what extent. We will need to be confident that each company's plan will deliver best value for consumers over the long term. If you have any questions please contact Peter Jordan, 0121 625 1312 or peter.jordan@ofwat.gsi.gov.uk, who is leading on this work. Yours sincerely George Day Director of Network Regulation Annex A Existing guidance New development New developments should comply with Document H – Drainage and waste disposal, of the Building Regulations The Building Regulations6 and Planning Policy Statement 25 Development and Flood Risk7. All sewers that will subsequently be adopted by the sewerage undertaker must be designed and built in accordance with the requirements of Sewers for Adoption8. Sewers should be designed to ensure that no flooding occurs above ground level for events with a return-period of 30 years. Building Regulations set out that rainwater shall discharge to either an adequate infiltration system or where that is not reasonably practicable to a watercourse or where that is not reasonably practicable to a sewer. The recent Practice Guide Companion to PPS259 sets out that the layout and landscaping of the site should aim to route water away from any vulnerable property, and avoid creating hazards to access and egress routes. This will mean that in addition to the protection of drainage system from events with a return period of around 1 in 30 years, no internal flooding of property should occur as a result of at least a 1 in 100 year storm event (including an appropriate allowance for climate change). PPS25 (paragraph 5) also makes it clear that off-site impacts should not increase flood risk elsewhere. For the range of annual flow rate probabilities up to and including the 1 per cent annual exceedance probability (1 in 100 years) event, including an appropriate allowance for climate change, the developed rate of run-off into a watercourse, or other receiving water body, should be no greater than the existing rate of run-off for the same event. The European Standard EN 752 Drain and sewer systems outside buildings, January 2008 also provides guidance that may be relevant. Known sewer flooding problems We have also set out our expectations that companies will propose to reduce the risk from known sewer flooding problems when this is shown to be cost-beneficial in Setting price limits for 2010-15: Framework and approach. Where it is not cost-beneficial to offer permanent hydraulic solutions to the risk from flooding we will expect each company to identify appropriate and acceptable mitigation measures. 1.) Defra Flood and Coastal Defence Appraisal Guidance FCDPAG3 Economic Appraisal Supplementary Note to Operating Authorities – Climate Change Impacts October 2006 2.) The 1 in 20 registers are recent and may not be mature. Companies may be able to demonstrate that some additions are due to previously unrecognized existing problems. 3.) Defra Flood and Coastal Defence Appraisal Guidance FCDPAG3 Economic Appraisal Supplementary Note to Operating Authorities – Climate Change Impacts October 2006 4.)Page 60 UKWIR Report 07/RG/08/2 5.)Development of guidance for sewerage undertakers on the implementation of drainage standards, Atkins, June 2008 6.)The Building Regulations 2000.Approved Document H – Drainage and Waste Disposal, ODPM, 2006. 7.)Planning Policy Statement 25,Development and Flood Risk, Communities and Local Government, 2006. 8.)Sewers for Adoption 6th Edition (SfA6), published by WRc for Water UK, 2006. 9.)Planning Policy Statement 25: Development and Flood Risk - Practice Guide, Communities and Local Government, 2008.  |
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