The costs of discharging trade effluent to sewer are based on the Mogden Formula and increase every financial year. Do you know how they are calculated and what the latest figures are?

Try our Mogden Formula Calculator.....

October is the time of year when many industries will receive trade effluent bills at the new rate for the first time. It is no consolation to be told by the local Water Plc that the new charges came into effect last April and that they should already have been budgeted for. Many managers will be reaching for their calculators to try to fathom out how the new charges are calculated and how they affect their businesses around the country. The two key national publications in this area are not normally published by this time of year, more than six months after the charges came into effect.

There are a number of interesting features in the way charges for trade effluent are calculated and PIE illuminates the thinking behind it. The Water Industry generally charges for trade effluent discharged to sewer on the basis of the Mogden Formula, named after the sewage works near Heathrow Airport where it was first developed. The formula estimates the actual cost of treating all sewered effluents based on Chemical Oxygen Demand (COD) and Suspended Solids (SS). You can work out your own bill based on the latest figures using PIEs Mogden Calculator.

Many Water Plc's have argued that the Mogden Formula does not reflect the true cost of treating trade effluent since there may be compounds in the effluent, such as heavy metals and toxic organics, which must be treated, but are not currently part of the existing charging formula. It is understood that this is currently being reviewed by the Water Industry and DEFRA, and it is likely that the basis for trade effluent charging will be widened to include a number of additional potential pollutants. This is in line with the concept of the Polluter Pays principle and could be bad news for some industries such as the Chemical, Textile and Metal Industries. Some have argued that their effluent is considerably less difficult to treat than sewage and that a lower charge should be made than the Mogden assessment. Unfortunately this cuts little ice with the Water Plc's since they generally receive trade effluent already mixed with domestic sewage. Depending on the scale of discharge and the nature of the waste, some companies can treat their effluent on site and take advantage of the many new technologies available to treat industrial effluents which may present a realistic payback on capital invested.

Investment must be based on potential savings, and the most any industry is likely to be charged is the maximum consented value for flow, COD and SS. Other restrictions may be highlighted in the consent such as Ammonia or Heavy Metals, but these are not currently subject to a charging formula. The lowest charge, assuming complete treatment is undertaken on site, is the reception charge (R) and volume charge (V), although this can still be quite significant. At each site, the Mogden Formula can be used to determine the cost of discharging the same volume of effluent at different levels of treatment. This calculator makes that task easy. Coupled with quotations for treatment plant of various specifications each site can determine if the reduction in charges justifies investment in on-site treatment. It is important to remember that diminishing returns are likely as effluent quality improves. It often seems that the Mogden Formula is pitched so that investment in on site treatment is never quite justified, but then it is not in the interests of the Water Plc's to lose this valuable source of revenue.

One interesting feature of the Mogden approach, is the variation in the cost of discharging the same effluent in different parts of the country. Try using our calculator to determine the annual cost of discharging a typical effluent of one tonne COD (200 m3/d, 5000 mg COD/l, 1000 mg SS/l) in the different regions of England and Wales. These vary by as much as 300% and this could be a significant factor in locating a new production facility, for example. The charges are intended to reflect the actual costs of treating sewered effluents and are carefully regulated by OFWAT. In areas where industrial development is dense and the population high, costs for treating trade effluent are generally low (i.e. Northumbrian and Yorkshire). In the South West, where there are fewer companies over which to spread operating and investment costs, the charges are very high. This is exacerbated by Tourism which can double the normal load in summer, requiring additional capacity and higher domestic charges to be carried by the local population.

Mogden charges can also vary each year as the strength of regional sewage apparently changes around the country. Sewage in Yorkshire, for instance, is nearly three times the strength of sewage in the Severn Trent region. This could be due to the high level of industrial effluent, although sewage in the similarly industrialised Northumbrian region, only has a COD slightly higher than Severn Trent. This is even more confusing since the level of solids in Yorkshire sewage is quite low compared to other regions. While sewage strength varies each year it frequently results in increased trade effluent bills rather than a reduction, and each year charges should be carefully examined.

Other reasons for major increases in trade effluent charges include the increased investment in local sewage treatment works to comply with national and EC legislation. Each company should only receive charges for the B portion of the Mogden Formula, for example, if biological treatment is undertaken by the local sewage treatment works. If only primary treatment is undertaken then only the R, V and S charges should apply.

Water industry charges vary each year in line with actual costs incurred. This generally results in an increase in trade effluent charges although this charge is only one of a "basket" of five charges which are "capped" every five years by the K factor, approved by OFWAT. While the average of these charges can rise by no more than K plus inflation, the other four charges are domestic and, as such, politically "hot potatoes". Once again this can lead to companies deciding not to invest in on-site effluent treatment. The costs of trade effluent can not be studied too carefully.

Useful further reading:
Waterfacts published each year by WSA Publications 01742-737331
The UK Water Industry: Charges for Services, annual, CIPFA 0171-895-8823.

The Mogden Formula