Brainfood: Behind The Spin

THE DILEMMA

by
Last Updated: 31 Aug 2010

It's hard to do well in business when you can't rely on your supplier.

Most firms can renegotiate prices or find another source. But if your supplier is an uncontrollable force, like the weather, life can be tricky.

Thames Water, like most other utility companies operating in Britain, is surfing backwards on an ebb tide of consumer confidence. Having already imposed a hosepipe ban on its 3.7 million customers in London and the south-east, it now has a likely drought to contend with. Water, its stock-in-trade, is in short supply, despite one of the wettest Mays in recent history. Normally, the kind of sensible advice that Thames Water has issued - cut down on domestic water consumption - would fall on friendly ears.

But huge leaks from the company's own pipe network have made a mockery of a reasonable request. How can the UK's biggest water utility, owned by German firm RWE, regain the trust of its customers?

THE SPIN

Thames Water could blame it all on climate-change, but most of its customers care more about the state of their back garden than the melting of polar ice-caps. Mindful of this, Thames Water is reluctant to restrict water usage and has come up with a far-fetched scheme to build Britain's first desalination plant in east London. The £200 million facility, purifying 140 million litres of seawater a day, would make restrictions a thing of the past.

THE STRAIGHT TALK

A public inquiry in late spring into the desalination plans gave London mayor Ken Livingstone the opportunity to vent his spleen against the company.

Londoners were being punished with hosepipe bans as a result of Thames Water's 'neglect and wastefulness', he said, which had caused 'tsunami-scale' leakage in its 150-year old pipes - which he likened to a 'Victorian sieve'. If the company spent money on updating its infrastructure, an astonishing 915 million litres of clean water could be saved every day, making the eco-unfriendly desalination unit unnecessary.

THE VERDICT

RWE is seeking to sell Thames Water, partly because of its poor fit with the other energy companies in its portfolio. Keeping costs down to extract more value from the utility's customers would therefore be a priority - one at odds with the urgent need for the expensive repair and modernisation of London's pipes. If the dry weather persists and the company has to impose standpipes on street corners, any remaining goodwill will be washed away. The outlook is not good.

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