IB 14/15 Ofwat seeks views on dealing with future water challenges

Ofwat has today set out its view on the main questions it – and the sector – needs to answer to deepen trust and confidence.

Ofwat has already set out the shared vision for the sector as one where customers and wider society have trust and confidence in vital public water and wastewater services. It has now published a series of discussion papers on the specific challenges facing the sector, and areas the sector could look at to respond to these challenges.

Major challenges Ofwat has identified include:

  • meeting demand for water in areas with stretched water resources;
  • dealing with new challenges around environmental water quality;
  • developing and maintaining resilient services and systems; and
  • tackling affordability.

Population growth, climate change and rising customer expectations could further heighten these challenges. Ofwat asks whether it has got its assessment of the challenges facing the sector right, and if it is focussing on the right questions to address these challenges in building its regulatory framework.

In keeping with its collaborative approach, Ofwat has set up a ‘marketplace of ideas’, which has seen companies come up with their thoughts as to how the sector needs to progress. Other organisations such as the Consumer Council for Water and Citizens Advice have also published papers on relevant issues.

At this stage, Ofwat is not proposing solutions, but it does set out that it will be looking to build on the successful principles that underpinned its 2014 price review, including a more proportionate and targeted approach to regulation that puts the onus on companies to act responsibly. Its intention is to make better use of regulation and market mechanisms to enable and encourage companies to create value, which will benefit customers, the environment and society but also investors.

Cathryn Ross, Ofwat Chief Executive, said:

“We want to build on the successes of the 2014 price review so that we enable and encourage companies to deliver more for less. If we are to maintain trust and confidence in these vital public services, providers need to deliver better services that are better value for money, while also using scarce resources more smartly and working better for our natural environment.

“With big challenges ahead, we cannot afford to stand still. The sector needs to innovate to create value that can be shared between customers, the environment, society, and of course investors.

“For instance, we have made a lot of progress in focusing  companies on what the customer – rather than the regulator – wants. Yet we believe the sector can go further. Companies need to stop seeing customers as passive consumers, and build relationships with them that will enable better value, more sustainable services.

“We also need to recognise that water is a scarce resource and start thinking differently about how we can make better use of it. We want to see more water trading, which will help some companies avoid the costs associated with expensive new storage capacity and keep bills down. We are also looking at whether regulation is getting in the way of innovation, in markets like sludge treatment, so that deregulation could drive innovation, delivering savings and helping to meet our energy needs sustainably.

“We don’t have a monopoly on good ideas. That’s why we are open to views on how we can all get the best deal for customers, society and the environment.”

Ofwat is seeking responses to its discussion papers in September 2015. It will then look to build on this conversation by continuing engagement throughout the autumn.

It will put forward proposals on details of its approach to regulating water and wastewater wholesale controls for the 2019 price review by the end of 2015.

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Notes to editors

  1. The Water Services Regulation Authority (Ofwat) is the economic regulator of water and sewerage companies in England and Wales. Its role is to help the sector build trust and confidence with customers, the environment and wider society. It exercises its powers in a way that it judges will protect the interests of consumers, promote value and safeguard future resilient water and sewerage services by allowing efficient companies to carry out their functions properly, and finance them.
  2. This release may be of interest to those following these companies: Affinity Water, Anglian Water Services Ltd, Bristol Water plc, Cholderton and District Water Company Ltd, Dee Valley Water plc, Dŵr Cymru Cyfyngedig (Welsh Water), Northumbrian Water Ltd, Portsmouth Water plc, Sembcorp Bournemouth Water Ltd, Severn Trent Water Ltd, South East Water Ltd, Southern Water Services Ltd, South Staffordshire Water plc, South West Water Ltd, Sutton & East Surrey Water plc, Thames Water Utilities Ltd, United Utilities Water Ltd, Wessex Water Services Ltd, and Yorkshire Water Services Ltd.
  3. Ofwat has published its discussion papers on www.ofwat.gov.uk . It is also publishing today reflections on its 2014 price review, and the lessons learned from that process, which will also help inform its future approach to regulation.
  4. This work is part of Ofwat’s ‘Water 2020’ programme. The Water 2020 programme has been set up to ensure that Ofwat’s regulatory framework addresses future challenges. This work includes:
    • in line with new legislation, and its subsequent commencement by the Secretary of State, facilitating the introduction of markets for wholesale water and wastewater services in England, increasing the scope for entry and, ultimately, more efficient outcomes and innovation; and
    • developing the framework for a proportionate price setting process for the 2019 price review that builds on the success of the 2014 price review  and looks beyond 2020.
  5. Media enquiries to Ofwat Press Office on:
    Benedict Fisher 0121 644 7642 / benedict.fisher@ofwat.gsi.gov.ukSimon Markall 0121 644 7697 / simon.markall@ofwat.gsi.gov.uk