Agenda item

Reports from Thames Water

Minutes:

Councillor Holborn introduced Thames Water’s representatives and thanked them for their cooperation in producing a report for the commission and attending the meeting to answer questions.

 

Nigel Dyer (Infrastructure Alliance Chief Executive Officer), Alex Nickson (Water Resources & Growth Lead), Hilary Murgatroyd (Communications), Sarah Hurcomb (South London General Manager), and Mark Mathews (Local and Regional Government Liaison Manager) introduced the agenda report and stated that:

 

  • Thames Water (TW) were grateful for the opportunity to participate in the meeting and would try to answer questions as openly and honestly as possible. They were happy to report back to the commission at a later date on any issues which could not be answered at the meeting
  • TW apologised sincerely for the disruption caused by the water main bursts. It was accepted that such incidents could be devastating to people’s lives and it was recognised that TW needed to do things differently
  • By way of an update on the situation with regards to Leigham Vale, two events had occurred in quick succession (on 15 October 2016 and 16 December 2016) and 25 properties had been affected, including six businesses. The pipe which burst was laid in 1880 and had a diameter of 21in. Re-lining works were being carried out but five homes were still unoccupied and it was important to understand why this was. 14 insurance claims were registered in relation to the October incident, with ten outstanding and a reserve of £300k held. The December incident gave rise to 41 claims, of which 31 remained open; in excess of £360k had already been paid and a further £630k reserve was held. TW were unable to give details of individual claims but would make general points with regards to the insurance situation. Where claims were yet to be settled, this could be because people hadn’t yet submitted a schedule of loss
  • Insurance claims in Islington were taking a similar amount of time to those in Leigham Vale but the incident was larger in scale with around 130 properties affected
  • The spate of bursts in late 2016 had had a significant impact on TW but also on the communities of London
  • TW were supportive of the joint scrutiny process and aimed to put things right going forward
  • The Trunk Mains Forensic Review (also referred to as the Cuttill report) was now published on the Thames Water website at https://corporate.thameswater.co.uk/about-us/investing-in-our-network/trunk-mains-review . This was commissioned by TW’s current Chief Executive when he started in post and was conducted by an independent third party, Paul Cuttill OBE, in order to give TW an objective account of the issues and deficiencies
  • The remit of the forensic review was to assess four things: the cause of each of the major bursts which occurred in 2016 (including whether there was a common underlying cause); the impact of each burst (including who and what was affected, how badly, and what the costs were); the immediate response to the incidents; and whether it was necessary to change the network configuration to prevent further bursts
  • The report concluded that there was no underlying cause; while this was positive it also meant there was no “silver bullet” solution. While the age and condition of the pipes were an underlying factor they were not the unifying cause. Each burst was due to a variety of different factors and each had a different history. TW’s investment strategy, which was supported by a risk management tool, was assessed as good but there were areas for improvement such as the way in which data was managed and how the statistical models were updated following a burst. The report stated that TW needed to improve the management of planned works and how local knowledge was fed in; it was also necessary to roll out more monitoring systems to ensure early detection of leaks, and to improve aftercare, including communications with customers and stakeholders
  • It was accepted that TW could have been better at getting information to individual residents and responding more quickly, particularly regarding re-lining works and dissemination of specific details on how to obtain help with insurance claims, and they were looking at how this could be achieved. In Leigham Vale, the number of TW staff engaging with customers had been increased and a weekly update was produced for stakeholders including local MPs. Drop-ins had also taken place for residents and TW had been engaging with local schools and other organisations to try to give something back to the community. It was recognised that much work needed to be done to regain trust and rebuild TW’s reputation and they would continue to support residents for as long as they needed. The written submission from a resident of Palace Road was noted and it was acknowledged she had suffered severe disruption and trauma

 

In response to questions from Members of the Commission, TW’s representatives stated:

 

  • There were two types of loss – insurable (which covered material loss) and compensatory (which covered damages, including elements such as travel and hotel costs but also emotional impact)
  • The intention was that nobody should suffer an economic loss as a result of flooding
  • TW’s strict liability was to replace like for like but they were in fact replacing new for old
  • Compensation payments could cover a range of physical or emotional impacts and were a tricky area as it was difficult to evaluate loss; the approach therefore was to advise that the legal representatives of both sides be tasked with reaching an agreement
  • TW were not qualified to assess emotional damages
  • It was acknowledged TW did not have a corporate policy or consistent approach around compensation and goodwill payments and the Cuttill report recommended this as an area for improvement. A temporary policy was now in place with a view to making this permanent
  • Goodwill payments had been made in the past with good intent but there were sometimes unintended consequences, including people on the periphery of an incident complaining that they did not qualify for a payment. The principle was that residents of properties affected by flooding were awarded £1k but senior managers had discretion. If Members believed that reconsideration was needed in relation to certain individuals TW could look into this
  • The time taken for Cunningham & Lindsey (whom TW contracted to provide customer care and welfare support for major incidents) to complete a preliminary schedule of loss for a particular property varied, but was typically around ten days
  • Each property had a case manager
  • If TW needed to make interim payments to businesses they did so; again the timescales for these varied and was partly dependent on whether paperwork could be provided but such payments could be made within a matter of weeks
  • If a loss adjustor had valued certain items with others outstanding, interim amounts were sometimes paid at that point
  • It was noted that water companies were liable under Section 209 of the Water Industry Act 1991 to pay for any loss or damage caused by water main bursts but that there was currently no obligation for payment to be made in a particular period of time. TW stated that they applied no limitations and that if a claim stalled, they talked to insurance representatives to try to resolve the process
  • TW sometimes made payments to cover business interruption but this depended on the circumstances

 

The Chair then invited Giles Gibson, Herne Hill Forum Chair, to address the meeting regarding the flooding caused by a burst trunk main in Herne Hill in August 2013. Mr Gibson stated that:

 

  • The flood was very painful for traders in the area
  • Businesses had warned about water leakage prior to the burst but nothing was done
  • The local economy suffered a huge impact and footfall for businesses in the area dropped off dramatically, meaning even those who were not flooded were badly affected
  • Four traders went out of business as a direct result of the burst and subsequent difficulties obtaining compensation, which took several months. Some were still fighting to recover losses 18 months later
  • There were concerns over potential conflicts of interest regarding Cunningham & Lindsey
  • The only business which was compensated quickly was one which was uninsured. This took around four months
  • Only Southwark Council acted with urgency, paying emergency grants to affected businesses
  • TW made a financial contribution to help regenerate the area but this had taken a great deal of effort to secure. A further additional payment was then made at a later date after TW were criticised in the media for their response to the incident but it was believed this was purely done to stop bad publicity

 

The Chair asked TW representatives to address to the points made:

 

  • It was regrettable that there were still problems and ill feeling almost four years on from the Herne Hill incident
  • TW was a different organisation with a different management team now and payments were made more quickly than was the case in 2013
  • If there were matters still outstanding in the community TW needed to get round the table with local residents and businesses to resolve these
  • They were shocked by what they had heard and were clear that their insurance teams needed to be sympathetic to the needs and wants of those affected by such incidents
  • In relation to a question regarding how TW would ensure the issues reported in Herne Hill would not recur in Islington, it was reported that some interim payments had already been made. Fortnightly community meetings took place with resident and business representatives where the generalities of insurance payments were discussed, though it was noted that details of specific cases could not be given for data protection reasons. It was reiterated that nobody should suffer an economic loss as a result of the burst and TW had worked with their insurance teams who in turn worked with businesses to understand their historical accounts in order that these could be used to determine payments
  • TW would be rewriting their policies based on the findings of the Cuttill report and would make sure via service level agreements that insurance companies were bound by these. It was important that the level of service was consistent and there was now a specific customer team in place providing a level of quality assurance which had not existed historically
  • Councillor Atkins stated that residents experienced greater trauma when the customer response was poor. It was noted that the response to the second burst at Leigham Vale was a marked improvement on the first incident
  • TW representatives noted that they had a number of loss adjustors working across London in December 2016 and called on an additional resource which was found to be more effective
  • Service levels were clear when it came to returning affected parties to normal as soon as possible
  • In response to a comment regarding businesses not being compensated in Herne Hill unless water actually came into their property, TW stated that compensation was paid to affected businesses regardless of whether water crossed their threshold
  • Any costs to TW over and above insurance indemnities were borne by shareholders

 

Questions were then put regarding the causes of bursts and the following points were made:

 

  • While the Cuttill report concluded that there was no underlying systemic reason for the spate of 2016 bursts, it was fair to say that the age of the pipes was a factor
  • TW had a system for measuring risk – and hence prioritising works – which combined two assessments; one concerning the probability of a pipe bursting (based on information such as the previous experience and knowledge of its condition) and the other relating to the potential consequences of a burst in that location. This system was recognised as industry-leading by Ofwat
  • The majority of the major bursts in 2016 were high on the risk scale
  • It was reasonable to assume that additional investment targeted at the high risk pipes would reduce the occurrence of trunk main bursts
  • TW had already stated they would commit an additional £97m to look at trunk mains and it was possible this sum would grow following their Trunk Mains Strategic Review; this was a broader review of TW’s trunk main assets which was separate from the Cuttill report and was due to report in July
  • Councillor Atkins noted that a meeting took place in 2009 following a burst main incident in Leigham Vale where TW promised surveys and investment, yet this never materialised despite repeated flooding at the same location. This had led to a great deal of frustration locally. TW stated it was regrettable that such promises were made but not seen through; it was unclear why this was but they agreed to look into the details and provide a written response to the commission. They understood such broken promises had led to a lack of faith in the commitments which were now being made. It was clarified that the Leigham Vale main would not be reopened until it had been fully re-lined and that surveys and had taken place in the area; furthermore monitoring equipment was being used and some flood defences had been installed
  • It was not possible for TW to state that two leaks in the same location would definitely lead to replacement or re-lining of the main as it depended on the individual circumstances; however, the number of floods in an area would be used to update the probability side of the risk model, which in turn would affect decisions on prioritising works. They would look into why this appeared not to have happened in Leigham Vale in 2009 and report back to the commission
  • TW were working with universities to look at how the risk model could be improved even further. They had a laboratory in Kempton where various stress tests were carried out and observations from this had indicated that looking at the outside of a water main did not give a great deal of information as to the probability of it bursting; rather, it was necessary to look inside and also listen to it. TW were committed to continuing to pursue the development and rollout of new technologies in this regard
  • Quarterly Sahara surveys were being done in Herne Hill on the trunk main network, along with proactive monitoring via Syrinix and Hydroguard
  • Syrinix was a system which monitored pipes from the inside, learning the behavioural patterns of flows and pressures over many months. An alarm was sent if a change was observed which could be indicative of a problem
  • Councillor Greening wished to see a significant increase in capital investment to replace the Victorian mains at a far faster rate than at present, estimating that this should be completed in a 10-15 year timescale

 

Mr Pryce, son of an affected resident, addressed the commission and stated that:

 

  • His mother lived in Palace Road and was an 88-year-old disabled widow. She had been flooded five times as a result of burst mains at Leigham Vale: in 2002, 2003, 2009 and twice in 2016. It was unacceptable that action was not taken earlier, nor that TW representatives at this meeting did not know why this was, and a full explanation was required
  • The TW Chief Executive, Steve Robertson (in post since September 2016), had visited the area and seen the devastation for himself. Mr Pryce believed this had made a big difference to the customer response since and thanked Mr Robertson for this
  • He queried what security arrangements were in place in Leigham Vale. TW representatives responded that security was in place from 8am to 8pm while properties were unoccupied

 

Councillor Jennifer Brathwaite, Cabinet Member for Housing and Environment, made the following points:

 

  • She would like to see the Cuttill report summarised into an easily readable and understandable format so that residents could get the gist of the main findings and recommendations
  • She believed TW should be seen to act as an emergency service when it came to major bursts and suggested the introduction and publicising of a short, easy-to-remember phone number for reporting emergencies
  • She asked what involvement customers had had in the Cuttill report and the broader trunk main review which was expected to report in July
  • It was important for local authorities to know where investment and works would be taking place in their areas so that plans for the future could be fully understood
  • It was frustrating to see so much water wasted to leaks and bursts as this went against the good work being done to encourage sustainable drainage systems and water conservation
  • In relation to the previous comments made regarding compensatory losses needing to be dealt with between the legal teams of both parties, she asked whether TW paid customers’ legal fees in these instances as there was a concern that most people would be put off pursuing such claims if not

 

TW representatives responded:

  • Over 630m litres a day were lost to leaks. This was a combination of trunk mains, distribution mains and customer-side leakage. Whilst this was significant, it was not the highest in the UK. TW were working with all boroughs to carry out water efficiency retrofits and working to reduce demand was a key part of the strategy. They were proud of the sustainable drainage work that had been done in Lambeth and Southwark
  • TW did not operate on the same basis as an emergency service and any changes would need to be discussed with the regulator, though it was accepted that improvements were needed in terms of the speed of response
  • A customer challenge group existed which represented TW’s customers and the Cuttill report had been shared with them; however affected residents had not been specifically involved in the reviews. The feedback from the various scrutiny meetings which had taken place across London in recent months would however be fed in to the broader trunk main review which was still in progress
  • They were unaware of any people with uninsured losses instructing solicitors to recover compensation but were happy to report back to the commission on the types of claims being handled
  • TW were about to start the process of consulting people in May and June about the shape of their future plans. The level of leakage and the expenditure needed to manage the mains network would be part of this. A list of dates and venues would be provided for consultation events. They had also been working with public engagement companies to instigate public debate regarding how TW was funded and regulated, ensuring a transparent and robust process looking at all options
  • Members requested details of the amount invested in the network, including monitoring, for each of the last ten years
  • Scrutiny input was welcomed and they were happy to return to scrutiny committees in the future to provide assurances and updates on progress. The Local and Regional Government Liaison Manager was happy to meet regularly with key councillors on how the findings of the two reviews are being acted on and what they were doing to rebuild trust and Councillor Brathwaite expressed an interest in this

 

The Chair concluded by thanking everyone who contributed to the meeting, including residents for sharing their experiences and Thames Water representatives for providing information and answering questions, and suggested the commission meet again in a year’s time to assess the progress that had been made.

 

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