UK water utilities query "virtual water grid" proposal ahead of general election

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LONDON, England, March 26, 2010 -- A proposal from the shadow cabinet for a "virtual water grid" touted ahead of a general election in May has been met with mixed reactions from utility companies.

The Conservative Party said such a grid enables water companies to trade treated water and avoid capital intensive projects where necessary.

The proposal - already in operation across parts of the UK - works whereby small connections are created between companies, enabling those with surplus water to sell to those with less.

Speaking at a the Waterwise conference this week, shadow environment secretary, Nick Herbert, said such a grid would incentivise the bulk trading of treated water between companies "as a way of ensuring water is available in the right places and that capital intensive projects can be avoided where possible".

Herbert also said such a system would encourage further trading in the South East. "We know that even the water-stressed South East has enough water to meet the demands of the region, but that the water is not in the hands of the right companies," he said.

In response to the statement, Meyrick Gough, water planning and strategy manager at Southern Water, told Water & Wastewater International (WWi): "We do not understand the point which Mr Herbert makes about the water not being in the hands of the right companies."

However, the utility also said that its "regional water grid" has been in operation since the 1960s. Gough added: "All of the water companies in the South East work with the regulatory bodies to determine the most cost effective solution to future water issues on a regional basis. This has already led to several new bulk supplies by local interconnections between neighbouring companies."

Recent interconnections include a 15-million litre per day transfer of water from Portsmouth Water to Southern Water to help supply water to customers in Horsham, Crawley and the western Rother Valley.

Further examples include a transfer of four million litres of water per day between Southern Water and Veolia Water South East (formerly Folkestone & Dover Water Services) and the eight-million litre per day transfer of water between Southern Water and South East Water.

Other utilities in the region also said such a proposal isn't a new concept, but could be encouraged further.

Speaking to WWi, Neil Whiter, water strategy manager at South West Water, said: "The idea of a "virtual water grid" is not a radical one and happens to some extent already, but undoubtedly it could be further incentivised. Further interlinkage between companies is clearly a good thing, not only in terms of cost but also security of supply, and I believe that it is already happening."

A Labour spokesperson told WWI: "We need to use water more efficiently but the Tories' plans don't reflect how the industry is already co-operating."

Speaking last year at the European Policy Forum in London, Herbert said a virtual grid has the potential to reduce both bills and the need for "costly capital and carbon intensive projects" to increase water resources.

At the time he said: "We live on a relatively small island where some regions are short of water and others which are not too far away have plenty of it. So whenever there is a dry spell, the issue of a national water grid is raised. I think that an actual grid can be ruled out as too expensive and environmentally damaging, but we could find ways of facilitating and incentivising more bulk water trading through a 'virtual grid'."

A spokesperson for the Conservative Party later said: "At the moment there are limited connections and trading - a big problem is how water companies are incentivised."

He said that although it works out cheaper to buy water on a treated bulk transfer compared to improving existing infrastructure, there is no incentive for this to happen. "You have to question why there's not more trading going on," the spokesperson added.

The Conservatives said that if they do win the general election, likely to take place on May 6, a White Paper will be introduced within the first year of government which would draw together reports affecting the water sector and look at the role of the regulator, Ofwat.

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