As the FT has noted this morning:
At least half of Thames Water's sewage plants lack the pipes and tanks to process enough waste water, leading untreated effluent to spill into rivers and waterways across its network, according to the company's own data.
They added:
Some 181 of the utility's 351 waste water plants did not have enough capacity to treat incoming material last year, with some able to process only a third of the quantity required by local residents.
They also noted:
The company, which serves a quarter of the UK's population, failed to provide data for about a third of its plants, meaning the overall number of sites that do not have enough capacity and therefore spilling waste material may be far higher.
In the circumstances, I think my headline is more than justified.
I also think that this news justifies something else that I have said for a long time, which is that the cost of nationalising Thames and all the other failing water companies (because you can be sure that others are sinking in the same way) would be very low. That is because they are failed businesses. In that case, their shareholders would be owed nothing, whatever value existing regulation has artificially created for them.
As for their loan creditors, they would have to take a considerable 'haircut' on the value of their loans precisely because they took the risk of lending to these companies and will have to accept that the price of doing so was that they might not be repaid if those businesses failed, as they very clearly are. If they cannot do the job that they were legally required to perform then that fact cannot be argued with.
Let me also stress that any price paid would not be in cash but would be in the form of new government bonds, with the cost being spread over decades and being more than covered by the returns water could make.
There is a substance to be dealt with here, which the government is shying away from whilst arguing about the legal form of any bailout. The substance in question is shit, and the fact that there is more of it than these companies are able or willing to handle.
Who cares about the legal form of the debate when our health is being threatened? Now is the time to act on water - because we have no choice but do so, and the price of getting what we need is that privatised water companies be swept away.
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This is what I would do.
1. Cover all plants with PV.
2. Where possible, installed wind turbines.
3. Electrolysers to produce hydrogen AND oxygen using the electricity so generated. By weight 8x as much O2 is produced compared to H2
4. Feed the O2 into the treatment process – & in doing so – turbo-charge the treatment process. This is not done at the moment cos O2 is expensive. But it is recognised that o2 injection vastly speeds up the trreatment process.
Elec fromn the renewables could also power pumps (thus cutting elec bills).
The above has a business case & all the tech exists, it would be trivial to do. It would not be a panacea, but it could be implemented fast (PV could go up within a year, ditto the electrolysers and O2 treatment). It won’t happen for reasons which gentle readers can imagine. Oh & all the electrolysers can be produced in the UK (ITM).
Thanks Mike
I’m with Mike.
When I worked for Yorkshire Water, over a decade ago, I was told by a senior engineer there that water companies could be net exporters of energy due to the waste they managed. Bringing them all back into public control and investing in them would provide Labour with some of that growth they so desperately want, surely?
I think so…..
Hold on …… In the spirit of David MacKay when considering the ‘obvious’ application of sustainable energy, let’s put some numbers on Mike’s proposal:
– According to Thames water (https://www.thameswater.co.uk/media-library/home/about-us/responsibility/education/the-sewage-treatment-process/the-sewage-treatment-process.pdf) : “At over 350 sewage treatment works, we treat 4,600 million litres of sewage from our 15 million customers, every single day.” So let’s say each ‘customer’ produces 300 litres of sewage needing treatment each day (I think we can assume that the 4,600 Million litres includes the amount that remains untreated and simply dumped!).
– The use of aerated water and injection of pure oxygen seems to be an area that’s been studied, is expensive, but shows benefits (https://edepot.wur.nl/403112). In the time available, I’ve not been able to find how much oxygen (in grams / litre of sewage) is considered necessary for an x times faster process. But adding oxygen of the order 10s of grams / litre have been discussed. So, for argument’s sake: let’s work out the numbers on basis of injecting 1 extra gram of oxygen / litre of sewage (so we’d need 300g / person / day, if each person produces 300 litres of sewage / day).
– According to Wikipedia: “The electrolysis of water in standard conditions requires a theoretical minimum of 237 kJ of electrical energy input to dissociate each mole of water, which is the standard Gibbs free energy of formation of water. It also requires thermal energy to balance the change in entropy of the reaction. Therefore, the process cannot proceed at constant temperature at electrical energy inputs below 286 kJ per mol if no external thermal energy is added.” – So let’s say it takes 300kJ of electricity to separate the O2 and the H2 from 18grams of water (16grams of Oxygen). So we’d need about 6000kJ of electricity per person / day. We’d also need energy to inject this extra oxygen — but let’s ignore that.
– There are more efficient methods than electrolysis to separate oxygen – but it was the proposal, so let’s go with that.
Solar Panels can produce (on average) about 20W / m^2 – that is 20 J/s/m^2. 6000kJ / day (is about 70W) and would require a solar panel area of approximately 3.5m2. NB adding an additional gram of oxygen / litre of sewage is equivalent to leaving a 70W bulb on all day.)
– The 15M Thames water customers would need a solar farm of approximately 52.5km^2 — about 3% of Greater London. This is to boost the processing by 1gram of oxygen per litre of sewage — the amount actually needed could vary hugely.
This brief sanity check:
– shows just how economically beneficial it has been to our water companies to pollute
– It is unlikely that simply putting solar panels on the Thames water infrastructure will address the problem – and addressing the most efficient method (rather than a quick botch) is essential.
– In the same way that it is important to consider how numbers are derived for things like tax, we should do so for other challenges that we face.
But, couldn’t solar panels help? And they are now cheap
Thanks
Please read David MacKay.
Every little bit helps .. a little bit!
We need big bits to make a difference!
MacKay uses an example (I paraphrase) …. If every single person turns off their phone charger when not being used, it can reduce everyone’s energy use by xx. As a nation this could save YY. All true. Every little bit helps a little bit! But we can rephrase: phone chargers left on use approximately [0.1]% of each persons energy use. 70M people saving (doing the right thing) still saves O.1% of each persons energy use! Every little bit helps a little. We need to make a big delta!
I hadn’t re-read MacKay for years … We all ought to. But update it! Our current energy use is more than his baseline … AI/cloud has increased energy use per person – by lots!
Definite need for that update – I’m not aware anyone is across it. MacKay essentially challenged a complacent, or well-meaning, orthodoxy. It’s become more difficult. Look at his work. The challenge has not gone away or reduced.
His approach should appeal to readers here. Use the numbers. He is scathing about (little) gestures… We need big changes.
Do the numbers mean that it makes sense? All sustainable options demand industrialisation of the countryside … there’s a reason oligarchs are buying New Zealand!
Every little bit will help a little bit … Multiply the help by 100Milllion and its a bigger number. Its still only a little bit per person.
But we all need to change a lot.
Do the numbers. MacKay did. The industry didn’t. Society hasn’t yet caught up. Interestingly, Mackay’s budget per person has increased with our use of cloud computing and AI (a lot per person, on average). We all need to redo the numbers.
I’m a bit late with this response, but I think Mike’s solution is a bit simplistic and ignores some major problems with increasing the flow through a sewage treatment works.
I doubt that the problem is due to the treatment capacity at the larger works where treatment is achieved by blowing air through the sewage (activated sludge process). In any case, the flow conditions through the process are critical as the solids (sludge) formed during treatment need time to settle before the effluent can be discharged. If the flow through the settling tanks is too high, the sludges can overflow the tanks and be discharged with the final effluent. Speeding up the treatment without increasing the hydraulic capacity would be unhelpful.
It is more likely to be a flow capacity problem at smaller works where the treatment process will use trickling filters or surface aeration systems where injecting pure oxygen would be difficult.
Many sewers are provided with storm overflows that allow excess flow in severe storms to overflow and discharge to a nearby watercourse. Modern overflows are fitted with screens to prevent obvious solids leaving the sewers. The design assumes that during a major storm, any overflow is diluted with rain water and should not adversely affect the environment. In most cases the alternative to a storm overflow is for the sewage to back up in the sewer and flood streets, gardens and sometimes houses.
At the treatment works excess flow is separated and diverted to storm tanks. When the storm tanks are full, the excess is allowed to bypass the treatment process and discharge with the final effluent. The storm tanks have the capacity to hold the maximum flow back for a specified time (I can’t recall the sizing criteria for the storm tanks, it’s based on a set number of hours storage for a major storm). After the storm, the storm tank contents is returned to the inlet for treatment.
Part of the problem is probably due to climate change and the increasing frequency and intensity of rain. Fixing the problem will require major works to improve the sewer capacity (lots of roads to dig up and replace sewers) and increase the treatment and storm capacity at treatment works (lots of tanks to build). That doesn’t take the responsibility sewage treatment companies, they’ve known about climate change for long enough to have reset their design parameters.
Thanks
Ban Bran?
Sadly, regardless of how little compensation is paid to shareholders and lenders, the cost of nationalising water will still be significant because of all the investment required to bring the infrastructure up to scratch. That’s unavoidable, because clearly no private solution exists. And at least we’ll save the money wasted each year on the useless OfWat.
That’s not a cost of nationalisation though. That was never coming for free. .
Nationalisation without compensation it is then.
Are you sure that you’re not a communist.
No, just a very competent accountant who knows how to value things.
@Alfred Wearer
So what would YOU pay for a privately owned company in a financial and regulatory mess, like Thames Water, Alfred?
Please show your working.
(I’m assuming that when you take ownership, you won’t want any nasty annual “communist” public subsidy, on account of buying a monopoly with a captive customer base, and you will have your own private finance in place for the unavoidable infrastructure investment, with no “communist” state bailout if it goes wrong.)
https://www.bbc.com/news/business-44250900
A pound?
That would be about right
I think a pound is a bit high, a pepper corn sounds about right. The shareholders can eat it too, so they won’t starve!
When it comes to the ownership of resources essential for our survival, such as water, we should all be communists.
Compensation? How about we see repayment of the debt-funded dividends that helped to land Thames and others in such a mess.
As a (deferred) member of USS, one of the pension funds that now owns much of Thames, I have grave doubts that they did adequate due diligence in buying the thing; some previous owners seem to have extracted more than they were due (putting it politely). However, nationalisation of Thames (and the others) now is a separate issue, and a valuation near zero seems generous given the state of the infrastructure and its critical importance.
Maybe the sewage overflow story in “The Archers” with all its ramifications for the village will raise awareness like the ITV Mr Bates film did for the Post Office debacle.
Rationalisation of water is a gift horse to a Labour Government looking for a reset and needing to demonstrate that it’s capable of delivering meaningful change. The necessary investment in infrastructure should help growth.
In other sewage news; from Ambridge. The Archers is running a.themed storyline about the havoc caused by a major sewage spillage. Health and livelihoods are threatened. Fiction being harnessed for social campaigning.
I noticed that the recent series of Silent Witness showed the state of many court buildings, with rats playing in the well of the court while it was in session.
Nice to see that some areas of the BBC are capable of telling the truth.
This seems so obviously correct that I can’t understand why it isn’t being done. The only explanation I can think of is that Labour MPs have a financial incentive not to do it.
Are there better explanations? From any side of the political spectrum – it is a genuine question rather than bait, I’m no expert but can’t see why we would continue with a set of failed companies?
A dogmatic fear of nationalisation
A dogmatic fear of Trump
So the crux of the issue is the VOLUME of waste water.
I would like to know over the years what volume we have had – say year by year since privatisation.
Then we could work out whether:
(1) If there has been additional water over the years.
(2) Where it has come from and what has caused it.
(3) If volume has not been growing whether peak period volume is the cause and why and what we could do to prevent it.
I am sure you could find out
I don’t understand the “we can’t afford it” argument with regards to the water companies.
Yes, renationalisation will cost money, even if a lower price reflects the investment needed.
But you end up owning a water company! It’s not a one-sided transaction.
And, they’ve made enormous profits since privatisation, so in time you will own a functioning company.
So “can’t afford it” is a lie, and a cover for avoiding renationalisation.
The “we can’t afford it” argument avoids the counterfactual; what happens if we don’t afford it?
If Thames Water reaches a point where they can no longer operate, there’ll be some chaos and unpleasantness, government will eventually step-in with unlimited amounts of money —more than the cost of nationalisation— that will be mopped-up by acquisitive chums, things will be made to limp along, there’ll be no permanent nationalisation and some fat cat chums will be very happy.
Another tick in the box and gold star for Rachel.
As privatisation of water and sewage is demonstrably failing and H M G does not want to nationalise, might it suggest any other alternatives?
“It is easy to talk big but the important thing is whether or not you clear up the shit.”
(Huraki Murakami))
Don’t expect no steer Keir to do anything that might properly stop the shit for the benefit of the people.
We know shareholders get nothing. What about senior debt? The 5.125% 2037 trades at 73.50 to yield 8.65% (or 4% more than a “credit risk free” gilt of the same maturity). If there is no default the bonds will repay at 100 in 2037 so, the market certainly recognises some risk but these are not truly “distressed levels”.
A 40 year gilt with a 2.5% coupon currently trades at 57. So, put TW into special administration, swap all existing debt into a 2.5% 40 year bond. Now, if bond holders want cash then they can get 57 pence in the pound so they are taking a big haircut… as they should.
The interest savings for TW would be huge compared with the options for refinancing the private sector is looking at and probably about 5% on a “blended basis” of their existing and projected debt portfolio. On £15bn that is a £750mm per annum saving that could go in as extra investment.
Sure, clean water costs and we will have to pay….. but cutting finance costs by £750 mm a year is a good start.
Note, these are real market prices for bonds but lots of “back of the envelope” calculations that would need refinement.
Thanks Clive
We are in broad agreement
It is always cheaper for the state to borrow for investment than for the private sector to borrow and then for the state to pay the private sector for use of the assets. It can only be otherwise if you have a dogmatic belief in the “efficiency” of the market. Go tell that to schools and hospitals burdened by PPI contracts.
But NHS leaders have been calling for capital investment from the private sector, because apparently there is not enough money available in the public sector (just like I’ve run out of inches to measure anything). But the borrowing will be more expensive and then the private sector will need a profit on top of that. How can the state pay for all of that, if it can’t afford to borrow itself? We can’t afford 4% but we can afford 8% plus a profit element? How does that work?
As is glaringly obvious, it does not work.
And there is demand for gilts.
Certainly, issuing gilts to finance water investment is cheaper….. probably about 1% cheaper than any properly capitalised private company. This is always true for any water (or other) company
In the case of Thames Water the proposals are for loans with interest rates of up to 9.75% – or 5% more than gilts… a finance cost that will be paid by users or government. These proposals (two rival ones) are being made by by existing bond holders who are just trying to milk more cash out of the company and salvage what they can from their existing position.
That finance cost is clearly unsustainable and will be resolved by either (a) a collapse a few months down the road or (b) higher bills or (c) lower investment. It really is NO solution at all. Public ownership is essential and probably inevitable.
In addition to lower ongoing finance costs, public ownership allows existing debt terms to be drastically re-written; I suggested 2.5% coupon for 40 years. The 2.5% gilt maturing 2065 trades at 57% of face value (due to its low coupon) so existing bond holders would exchange their paper for this bond “face vale for face value”. Locking in rates at 2.5% for 40 years would be a huge saving over having to refinance existing bonds as/when they mature. This would unlock cash for investment.
This looks like a 43% “haircut” for existing bond owners but, in fact, is not quite so severe because existing bonds were typically issued in the recent very low interest environment and would be trading below face value even if there were no problems at TW. But, in a default, all bonds are treated “pari passu” whatever their original terms and would all be paid out in this new “gilt/gilt-like” bond.
All noted Clive.
And near, albeit I think generous.
I’m showing my ignorance but,in the end, who would declare a water company “bankrupt”? I am very keen on public ownership of the major industries and utilities, but couldn’t even an obviously failing company just stagger on by declaring that all is fine and that it has arranged some form of new investment that will enhance its standing. Who has the job of calling out such deceit and announcing “curtains” on the sorry charade?
There is special law to make water companies bankrupt – uopdated about a year ago. The government is, hiwever, extraordinarily unwilling to use it although the failure to supply the required service conditions were met long ago.
[…] despair. A regular commentator on this blog named Andrew suggested only yesterday on a post on nationalising […]
And now I see Thames are going to ask Ofwat for permission to raise bills by another 40% above the outrageous increases allowed by this useless regulator to pay for,’vital investment’ in the infrastructure. The very investment they’ve failed to do for years.
The very first thing a real left wing party… actually any political party that gave a damn about it’s own country…..would do now is renationalise Thames.
Agreed