Getting it right for customers - how can we make monopoly water and sewerage companies more accountable?
Since the water and sewerage sectors were privatised in 1989, it has been our role to regulate the monopoly companies. We have a duty to protect consumers’ interests while ensuring efficient companies can carry out and finance their functions. And in that time, the system of checks, incentives and tough targets that we have developed – and the enforcement action we have taken where necessary – has worked well in achieving this.
However, the challenges of the future are different in nature, scale and complexity from those of the past. They will make delivering sustainable water and sewerage services increasingly difficult. This is why we are reviewing the way we check that the companies we regulate are meeting their legal obligations and their customers’ expectations. We call this ‘regulatory compliance’.
We want the companies to be directly accountable to their customers for their performance. We also want to improve the way we regulate, taking account of the increased maturity of both the sectors and the regulatory framework – we want the companies to own their own performance.
In the past, we have relied heavily on information that the companies provide to us through a series of well-understood mechanisms, such as the June return. We recognise that the challenges of the future will require us to widen the scope and sources of the information that we use, while reducing the volume of data we collect.
Instead of looking at data from every company on every service indicator every year, we will develop ways of identifying where we consider there is a real risk that the companies may not be delivering for their customers, the environment or wider society. Adopting a risk-based approach to compliance represents a significant change to the regulatory relationship we have with the companies.
Our focus report 'Getting it right for customers - how can we make monopoly water and sewerage companies more accountable?' sets out why we want to change our approach to regulatory compliance, and how a risk-based approach could operate.
Further information
- ‘Delivering sustainable water – Ofwat’s strategy’, Ofwat, March 2010.
- ‘Allocating risk and managing uncertainty in setting price controls for monopoly water and sewerage services – a discussion paper’, Ofwat, October 2010.
- ‘Improving regulatory reporting and compliance’, Keith Harris, July 2010.
- ‘Involving customers in the price-setting process – a discussion paper’, Ofwat, October 2010.
- ‘The role and design of incentives for regulating monopoly water and sewerage services in England and Wales – a discussion paper’, Ofwat, October 2010.
- Sustainable water event, 20 October 2010.
Find more information about our future regulation programme of work.
