As announced last year (2006/07), STW have devoted greater resources to leakage management due to seeing a leakage increase in 2005/06.

STW employed more people, invested in new leak detection technology and fixed around 37,000 leaks, 8,000 more than the previous year. They invested almost £20m more than in 2005/06. This effort has reduced leakage by 9 Ml/d this year but it was not until the month of March 2007 that STW attained a monthly level of leakage commensurate with the Ofwat annual target of 505 Ml/d. Unfortunately, this has meant that STW did not attain the annual average target level of leakage, with our end of year leakage being 524 Ml/d. Throughout, STW has kept Ofwat fully informed of progress and will be discussing with Ofwat ongoing plans and commitments to maintain progress in reducing leakage.

Reducing leakage remains a priority in 2007/08 and STW is determined to maintain the good progress that was made in the second half of 2006/07. It is a good position to be going into 2007/08 in.

Of the 37,000 leaks repaired in 2006/07, 9,000 were on the customer's private system. Although this is not STW's responsibility, it offers a discretionary free repair service and will replace private pipes up to a length of 12 metres free of charge.

STW is responsible for operating and maintaining 46,000km of water mains; as these assets age, they deteriorate and leakage will increase. To offset this rise it has the largest mains renewal programme within the industry. In 2007/08 STW will be spending £45 million replacing 330km of mains with a record of frequent bursts or high background leakage (i.e. leaks below those which are detectable with current technology).

The Ofwat Determination for AMP4 assumed around £184 million of expenditure over 5 years (in nominal terms). STW have already invested around £85 million in the first two years and expect to invest a total of around £231 million, some 26% more than assumed in the Determination, over the whole AMP4 period on mains renewals alone.

The current rate of renewal represents only 0.72% of STW's network per annum and is in excess of the funding provided under the agreed funding for AMP4. STW is monitoring the performance of areas where mains have been renewed, in order to help the industry understand the benefits of mains renewal as part of a leakage management strategy.