Sunday, 4 December 2016

Dee Valley: Only a pawn in their game?

The hostile takeover bid of Dee Valley Water by Severn Trent will cost jobs and hurt the wider local economy. That much is clear.

But to what extent is Dee Valley Water just a pawn in a far bigger game? Plaid Wrecsam has already highlighted Severn Trent's longer-term intentions, which are now becoming clearer.

ST is proposing to combine its water resource zone in Powys with the Wrexham water resource zone, to create its ‘Welsh’ business.

However, the company's Powys region is believed to be one of its most expensive areas to serve and that it uses cross subsidies to enable those costs to be spread across ST's whole supply area, thereby keeping bills consistent across all its customers. 

But, if ST took over DVW over and brought its Powys region under a distinctive Welsh licence, these costs would be spread across a much smaller customer base and there is therefore the potential for bills to rise, not only in Powys but across Dee Valley Water’s current Welsh customer base. 

Staff at Dee Valley are asking: "Has any consideration been given to this matter and has Severn Trent been challenged on this?"

It is clear that there is no immediate financial benefit from paying such a high premium for DVW.

The growing suspicion, therefore, is that this is a politically motivated move.

We have learned that ST's bosses came to talk with DVW staff a couple of weeks ago. The chief executive Liv Garfield said that buying Dee Valley Water would give ST a ‘place at the table’ in relation to Welsh Government policy. 

A strange use of words because ST already has a place on the Welsh Government’s Wales Water Forum, although it hasn’t been as engaged in the process as DVW and Welsh Water of course.

The Wales Act is likely to transfer more power over water to the Welsh Government, something the Government of Wales Act of 2006 under Peter Hain's guidance significantly omitted.

The concern of many is that ST is using Dee Valley Water as a pawn to gain more influence over the Welsh Government, to safeguard its very favourable current arrangements (see below) in relation to Welsh water resources and potentially seek to exploit these further for use across the border in England. 

This is something Plaid Cymru MPs have long highlighted.

Following the publication of Water UK’s report on long-term resilience in the water industry, Ofwat has started to encourage water companies to consider some of the possible solutions highlighted in this report. One of those identified for ST was the possibility of moving water via the Dee, into its area – buying DVW would obviously make it easier to do this. 

This looks like Part 2 of Severn Trent's theft of water in Wales - please read on for the first part of that theft.

Severn Trent's water robbery of Wales (Part 1)

In 1984 the Thatcher government imposed a contract upon Welsh Water compelling it to sell water to Severn Trent Water Authority (both were then in public ownership). This was an acknowledgement that Wales had a right to expect payment for water it exports to England. However the terms of contract were outrageously favourable to Severn Trent and can only be described as a steal.
 The contract states that Welsh Water must supply Severn Trent with up to 360 million litres (80 million gallons) of water daily for cost price (see below for the terms written into the privatisation of Severn Trent Water in 1990). 
 It is alleged but unconfirmed that the cost is 3 pence PER TONNE (the equivalent of 73 GALLONS FOR 1 PENNY) 
 This contract runs until March 31 2073 but the contract also has a written-in clause for a renewal option for another 99 years. This daylight robbery plunder must be re-negotiated to ensure that Welsh water is able to charge a fair rate for its water. 

Dwr Cymru 
Agreements for the import of water from the Elan Valley Reservoirs provide for Dwr Cymru to supply water from the Elan Valley Reservoirs to Severn Trent Water for 99 years (with an option for Severn Trent Water to renew the supply agreement prior to 31st March, 2073), at an annual charge which varies from year to year by reference to the average of the water supply unit costs of the two companies. The amount of water supplied shall, save in certain circumstances, be as required by Severn Trent Water, but shall not exceed approximately 360 Ml/d. 
 Dwr Cymru are responsible for, and bear the cost of, maintaining, operating and renewing the reservoirs and the abstraction of water. The supply agreement can be renegotiated at an earlier date in certain circumstances, with provision for the terms of the new arrangement to be determined by third parties in the absence of agreement. The agreements also provide for the sale by Dwr Cymru to Severn Trent Water of the Elan Valley aqueduct and connected land and buildings including the treatment plant (the "Elan Valley Assets") at a consideration of £31.7 million. 
 Completion of the sale is deferred until the earlier of 31st March, 2073 and the expiration of 21 years after the death of the last survivor of the issue of the late King George V (whether children or more remote) actually born before the date of his death. 
The consideration is held by trustees upon terms which entitle Dwr Cymru to the income and, in certain circumstances, portions of the capital. During the term of the contract of sale, Severn Trent Water is entitled as licensee to possession and control of the Elan Valley Assets and the benefit of any income from them.
 Severn Trent Water is also obliged to operate and maintain them and meet all costs and liabilities relating thereto.
 Dwr Cymru is entitled for a consideration to take water from the aqueduct to supply certain areas in its own Water Region. If the contract of sale is completed, Dwr Cymru will become entitled to the trust fund absolutely. If the supply agreement becomes subject to renegotiation (including in circumstances where Severn Trent Water gives notice that it intends to renew the agreement for a further 99 years) the contract of sale lapses, save for certain specified provisions in the contract which continue while negotiations are carried out. 
 These provisions include the right of Severn Trent Water to possession and control of the Elan Valley Assets, the right and benefit of any income therefrom, and the obligations of Severn Trent Water to operate and maintain those assets and meet all costs and liabilities relating thereto. As with the supply agreement, the terms of the new contract for sale may be imposed by a third party if Severn Trent Water and Dwr Cymru cannot reach agreement with respect to the arrangements for the use, occupation or ownership of the Elan Valley Assets. During the period that the contract of sale is being so renegotiated, the trustees hold the trust fund for Severn Trent Water absolutely.

No comments: