1. Case Study Water Bills Kevin Andrews Defra
Workshop on Disproportionate Costs, 10./ Copenhagen

2. Table of Content Introduction Overview of case study
Topic of case study
Results
Conclusion and outlook
Workshop on Disproportionate Costs, 10./ Copenhagen

3. Introduction Main methodological issue tackled
Affordability and the analysis of alternative financing mechanisms
Relevance in respect to the request of the WDs
In considering affordability “All possible financing mechanisms need to be explored as a first step”
What happens if existing financing is insufficient?
How can the abuse of financial arguments be prevented
Link between affordability to distributional effects
Workshop on Disproportionate Costs, 10./ Copenhagen

4. Overview of the CS
Costs to WI of between Euro 900m (phased) and Euro 2000m (unphased) EAV basis
Under existing/planned tariffs arrangements impacts can be very high (+450 Euro/yr) in some cases – regressive impact
Phasing reduces costs significantly by 60%
Social/distributional issues arise mainly through bad debt and associated social exclusion
Workshop on Disproportionate Costs, 10./ Copenhagen

5. Analysis of bills by social groups
Metered
Unmetered
All
By Income Decile
Top Decile
0.4%
0.5%
Bottom Decile
4.5%
4.4%
By household type
All other households with children
1.7%
1.9%
1.8%
Households (excluding single parents) with 3 or more children
2.3%
2.1%
Households with more than one adult of pension age
1.3%
2.0%
Households with one adult of pension age
1.0%
1.6%
Non-pension age households with no children
0.8%
1.2%
Single parent households with children
1.4%
By employment status of household
More than one unemployed adult
7.7%
4.1%
One unemployed adult
2.5%
2.4%
Zero Unemployed adults
By eligibility for vulnerable group status (current regulations)
Eligible households
2.7%
2.6%
Non-eligibile households
By eligibility for disability benefits
All Households
Workshop on Disproportionate Costs, 10./ Copenhagen

6. Topic of CS:
Affordability analysis predicated on existing planned cost pass through (tariff) arrangements
Good tariffs/charging policies are partly a solution
Better tariffs will also help to alleviate problem further but takes time and it will not solve all of the problem, other financing possibilities also need to be looked at
Financing possibilities limited/take time and hence need time exemptions to spread costs
Abuse can be avoided by identifying adaptation strategies
Workshop on Disproportionate Costs, 10./ Copenhagen

7. Results: Main findings: Affordability can be analysed at a high level
Analysis of alternatives can be largely desk based (providing sufficient prior evidence is available)
Links between affordability and social impacts can be established through discussion
There is transferability providing similar conditions exist in different areas
Abuse can be prevented by focussing on adaptation/mitigation strategies
Workshop on Disproportionate Costs, 10./ Copenhagen

8. Conclusion and Outlook:
Draft RBD plans should contain objectives +
Evidence of impact assessment (examination of costs and benefits and other (social) impacts
Evidence that alternative financing opportunities have been examined against RELEVANT criteria
Evidence that ambition remains high
Adaptation strategy – statement of what steps are being taken to improve cost pass through/tariff arrangements
Mitigation strategy – what steps have been taken to mitigate the negative social consequences
So that objectives can be met in the future without affordability impacts
Workshop on Disproportionate Costs, 10./ Copenhagen

9. Thank you for listening.
Contact for further details on the Case Study
Kevin Andrews
Natural Environment Economics
Water and Flood Management
Defra
Workshop on Disproportionate Costs, 10./ Copenhagen