Weekly environmental update - 19 July

Welcome to the latest edition of our weekly Environment Law news update. As ever, we bring you developments, insights, and analysis in the world of environmental law.

NEWS ROUND UP

New PFAS Guidance will be released soon

The Drinking Water Inspectorate (DWI), the UK’s authority on water quality, has announced that it will issue new guidance to water companies on Poly and Perfluorinated Alkyl Substances (PFAS) later this summer. This announcement was included in the Drinking Water 2023 – Public Supplies England – Annual Report published earlier this month.

PFAS are a group of over 10,000 chemical compounds that are known for their persistence in the environment. These substances are often referred to as ‘forever chemicals’ due to their resistance to natural degradation processes. They have been widely used in various industries for their water and grease-resistant properties. However, their prevalence and longevity in the environment have raised concerns about their potential impact on human health and the ecosystem.

Since October 2021, water companies have been required to submit samples for PFAS testing. This requirement was part of an initial effort to understand the extent of PFAS presence in the water systems. The upcoming guidance from the DWI aims to build on this initiative by introducing new reporting requirements and setting expectations for the next five years.

DWI’s announcement provides that the new PFAS guidance will “consolidate and supersede all previous guidance and information letters regarding PFAS monitoring, risk assessment and reporting requirements, as well as [DWI’s] expectations for AMP 8 [Asset Management Plan 8] and beyond”. An “Asset Management Plan” refers to a five-year span encompassed by a water company’s business strategy, which outlines immediate and future goals for the forthcoming phase. AMP periods, established by Ofwat, aim to enhance efficiency and service standards in the sector. Achieving or failing to meet AMP objectives results in financial incentives and sanctions for performance in delivering good customer engagement, affordable bills, resiliency in the water network, and innovation.

According to DWI’s announcement, the key areas updated in the new guidance will relate to: 

• The inclusion of an additional compound, 6:2 fluorotelomer sulfonamide alkylbetaine (6:2 FTAB). This will become a requirement from January 2025;
• A new duty for companies to inform DWI should there be a detection of any PFAS chemical not listed identified at concentrations above tier 1;
• PFAS tiers will be applied to any PFAS chemicals detected in raw and final water where no treatment is in place; and
• Previous guidance on PFAS/PFOA will be expanded to apply to all PFAS chemicals listed in Annex C of the Information Direction.

We still need to wait for the new guidance to be released, but, from the early details, this it seems to represent a proactive approach to managing PFAS in the water supply. 

National Wealth Fund Bill: A Green Investment Revolution

The new Labour government has introduced the National Wealth Fund (NWF) Bill, a cornerstone of its legislative agenda aimed at driving economic growth and supporting green industries. This initiative is part of a broader strategy to rebuild the UK’s economy and address pressing environmental challenges.

The primary purpose of the NWF is to support transformative investments in infrastructure and clean energy. With a focus on sectors such as ports, gigafactories, clean steel, industrial clusters, and green hydrogen, the fund aims to catalyse significant private sector investment. The NWF will be capitalised with £7.3 billion, allocated through the UK Infrastructure Bank, to attract private investment and generate returns for taxpayers.

To streamline investment processes and mobilize the UK’s deep pools of institutional capital, the NWF will align key institutions, including the UK Infrastructure Bank and the British Business Bank. A National Wealth Fund Taskforce has been established to oversee the fund’s operations, chaired by the Green Finance Institute and featuring notable figures such as former Bank of England Governor Mark Carney and Barclays CEO C.S. Venkatakrishna.

By way of investment focus, the NWF will prioritise investments in green industries, supporting the transition to a clean energy economy. This includes significant investments in upgrading ports and supporting jobs in the energy sector and domestic manufacturing. The government has emphasised the need for immediate action, with investments starting as soon as possible to catalyse private investment at a greater scale.

The NWF is part of a broader strategy to drive local and economic growth in every region of the UK. By investing in future industries, the fund is expected to create thousands of jobs, particularly in the clean energy sector. This initiative reflects the Labour government’s commitment to fostering sustainable economic growth and addressing environmental challenges.

The government has highlighted the urgency of the NWF’s mission, with plans to begin investments immediately. This proactive approach aims to attract private investment and support the UK’s transition to a green economy, ensuring that every part of the country benefits from economic growth and job creation.

Challenges and Considerations

The success of the NWF will depend on effective implementation and governance. Attracting private sector investment will require clear communication and incentives and building strong partnerships with businesses and investors will be key to maximising the funds impact. In addition, robust monitoring and accountability mechanisms will be necessary to track the progress of investments and ensure that they deliver on their promises together with transparency in how the funds are to be used and how the outcomes are achieved will be important for maintaining public trust.

Overall, the NWF bill represents a bold step towards a greener future and if implemented effectively has the potential to drive significant economic and environmental benefits for the UK.

UK Government grants consent for three major solar projects

The new UK Government announced this week they have granted development consent for three new solar projects: Mallard Pass Solar Project in Rutland, Great Burton Energy Park in Lincolnshire, and Sunnica Energy Farm in Suffolk. 

The final decisions on each application had been delayed for a number of reasons – most recently due to the general election. However, within a week of being appointed Secretary of State for, Ed Miliband approved all three developments. 

However, not everyone is happy with the decisions, including Conservative MP for Rutland and Stamford, Alicia Kearns, who posted on X that she is considering a legal challenge to the decision to grant the Mallard Pass project. Nonetheless, in a letter sent by the deputy director for energy infrastructure planning on behalf of the Secretary of State it was said he “has considered the overall planning balance and, for the reasons set out in this letter, has concluded that the public benefits associated with the Proposed Development outweigh the harm identified, and that development consent should therefore be granted”. 

The decisions had all been ultimately made by the Secretary of State due to their size (all having a generating capacity greater than 50 MW) and thus being considered Nationally Significant Infrastructure Projects. Such applications are submitted to the Planning Inspectorate who makes a recommendation to the Secretary of State. However, the Secretary of State can, upon review, depart from the recommendation given – as was the case here in the Sunnica Energy Farm project, which the Planning Inspectorate had recommended for refusal. 

Ofwat Announces Draft Price Determinations 

Last week, Ofwat announced their draft proposals for the 2024 Price Review for water company spending in England and Wales over the upcoming 5 year period from 1 April 2025 to 31 March 2030. 

As part of their compliance with the economic regulator, every five years, water companies are required to submit a business plan to Ofwat outlining their investment costs over the upcoming 5 years. Along with forecasting for day-to-day operating and maintenance costs, companies are also required to outline their investment costs that reflect their intentions on delivering improvements for both customers and the environment along with setting out how they plan to do so.

Water companies submitted their business plans back in October 2023 and, following the scrutinisation and benchmarking of these plans by Ofwat last week, they published their draft determinations which outline the investments and targets that Ofwat expect water companies (both individually and collectively) to reach over the upcoming 5-year period. 

The full list of draft determinations can be found here, but some of the headlines are as follows: 

• Increase in permitted investment spend for water companies to £88 billion pound, outlining set funds be allocated to improve the quality of drinking water, reducing storm overflows and improving sewage works; 
• An annual increase for individual consumers at an average rate of £19 per year before inflation; 
• Water companies should invest nearly £1,100 per customer in improvements over the next five years; 
• Allowed rate of return for companies of 3.72%; and 
• Inclusion of plans for nine new reservoirs and seven large-scale water transfer schemes. 

When reviewing the companies’ business proposals against their own draft determinations, Ofwat rated only two water companies, Severn Trent and South West Water, as setting ambitious targets for improving performance. This was based on their pledges to reduce storm overflows.

These proposals are currently out for consultation. Stakeholders now have until 12 noon on 28 August 2024 to provide their comments. Access to the consultation can be found here. Once closed, these comments will be considered, and final determinations are expected to be published on 19 December later this year. 

Ofwat to put Thames Water under special measures

In light of the regulator’s 2024 price review process, Ofwat published draft determinations outlining the level of investment that can be raised by water companies from customer bills over the next five years. A significant development is the proposal of a Turnaround Oversight Regime for Thames Water, which is a measure imposed for the first time by Ofwat. 

The regime would require Thames Water to:

• provide a ‘delivery action plan’, outlining the actions the company proposes to take to expand its delivery capacity;
• regularly report on its progress, which would be subject to review and additional scrutiny by an independent third party assurance provider;
• fully re-evaluate its plans for transformation to demonstrate how it will deliver the necessary step change in operational performance; and
• provide a financial resilience plan. 

Ofwat might also appoint an independent monitor with full access to company information to monitor and report on the company’s progress. 

Since the chief executive of Thames Water resigned last year, there has been much talk on renationalising the company and their significant operational and financial issues. 

The draft determinations allow Thames Water to raise bills to fund £16.9bn in investment for the next five years, with bills increasing from an average of £436 this year to £535 by 2030. 

The company has specific targets for reducing pollution (30%), storm overflow spills (64%), leaks (19%), supply interruptions (66%), phosphorus pollution (21%), greenhouse gas emissions (5%), and internal sewer flooding (55%), while also building a more resilient water supply.

To put an end to these special measures, Thames Water must demonstrate financial resilience, which may involve limiting debt and possibly separating the business into multiple companies.

This is part of Ofwat’s 2024 price review (PR24) process, and the regulator has launched a consultation on its draft proposals, with plans to issue its final price determinations in December. Thames Water has welcomed the opportunity to provide Ofwat with further evidence about the need for the investment they plan to make, their costs, and how they will deliver it. If a key target is missed, Ofwat said the company would automatically be fined.

In order to deliver, the company was lobbying the government to allow them raising its bills. They have provided an ambitious plan focusing on client and shareholder’s priorities.

Thames Water is not the only one facing such challenges. Ofwat also put the Southern Water on the spotlight, who is considering Ofwat’s initial proposals for how their customer bills and investment plans will look in the near future. 

Poultry Producers Face Legal Challenge over River Wye Pollution

The river Wye once a thriving ecosystem has recently been downgraded to an “unfavourable declining status the worst category for a protected waterway following an assessment by Natural England. This downgrade highlights the severe environmental challenges the river faces including significant pollution and habitat degradation.

It has recently been reported that Leigh Day a law firm representing numerous individuals and businesses affected by pollution in the river Wye have issued a ‘Letter Before Action’ to poultry producers Avara Foods, Freemans of Newent and Cargill Plc. The letter urges the companies to address the ongoing pollution dispute. The companies are accused of causing significant phosphorus pollution leading to harmful algal blooms and environmental damage in the river as a result of their actions through their intensive poultry farming practices. The law firm claims that the increase in poultry numbers has led to a rise in phosphorus rich waste entering the river.

The letter further outlines the negative impacts on local residents and businesses affected by pollution in the river Wye including deteriorating water quality, reduced fishing opportunities and disruptions to leisure activities and is seeking compensation for the alleged pollution and has given the companies until 20^th August to respond before commencing court proceedings. 

Avara Foods operates the largest poultry business in the Wye catchment area along with its parent Cargill Plc. Despite Avara’s commitment to reducing phosphate levels by 2025 and the sale of chicken manure within the Wye catchment it seems that the case will be dealt with in the High Court if a satisfactory resolution is not reached.