PN 02/21: Ofwat delivers final decisions on strategic regional water resource options at accelerated gate one

Ofwat has today confirmed in its final decisions that the four strategic regional water resource solutions designed to serve Hampshire and proposed by Bristol Water, Southern Water and Wessex Water and Portsmouth Water (the solution sponsors) have passed through accelerated gate one – its first checkpoint.

This follows representations received from solution sponsors and other interested parties in response to Ofwat’s draft decisions. After taking into account all representations and following a comprehensive assessment by RAPID, Ofwat has decided that there will be no change to its draft decisions.

Hampshire is the home of some of the most iconic chalk rivers in England. While these rivers support a rich and diverse wildlife and provide clean water for households and businesses – they are also at risk from over abstraction during times of drought. To protect the ecosystem and to plug the gap between supply and demand – a reduction in the abstraction of water is needed and a range of options in the form of new solutions are required.

The solutions proposed are as follows:

  • Desalination (proposed by Southern): The desalination plant in Hampshire could provide up to 75 million litres of water per day and would be the largest seawater desalination system in the UK.
  • Water recycling (proposed by Southern): An alternative to desalination that could also provide up to 75 million litres of water per day.
  • West Country North Sources (jointly proposed by Bristol Water, Wessex Water and Southern Water): A reservoir in Bristol Water’s area and transfer through Wessex Water’s area to Southern Water.
  • Raw water transfer from Portsmouth Water’s proposed Havant Thicket reservoir to Southern’s Otterbourne Water Treatment Works (jointly proposed by Southern Water and Portsmouth Water): This new proposal includes abstraction from the proposed reservoir, a new high-lift pumping station and around a 40km pipeline to Otterbourne Water Treatment Works.

All four solutions have passed the first checkpoint but, in its assessment, RAPID still had concerns regarding the progress on key activities which are expected at this stage.

For desalination and water recycling, it found that some elements of the spending had not been clearly evidenced, not all were efficient, and therefore not all expenditure claimed should be allowed.

Shortcomings in a number of areas including the completeness and quality of these two submissions also mean that Ofwat proposes to implement a delivery incentive penalty of 10% on Southern unless a number of remedial actions are completed as a priority.

As Southern was awarded ring-fenced funding in December 2019 to investigate and develop solutions which would be in place and operating for the end of 2027, it has been asked to provide assurances at gate two that progress on its three proposed solutions will allow it to deliver on time. This will support the delivery of Southern’s obligations under a Section 20 agreement with the Environment Agency and prevent longer term environmental damage being caused because of an extended reliance on drought orders and permits as a means of topping up customers supplies.

David Black, Chief Regulation officer at Ofwat said:

“The first checkpoint has highlighted some encouraging signs of collaboration and I am confident that the companies involved will continue to drive forward solutions that will secure resilient water supplies that will deliver benefits to customers, the environment and society as a whole.”

Simon Moody, Deputy Director at the Environment Agency said:

“Southern Water has a pressing need to fill the gap between its supply and demand for water in Hampshire to protect the environment and provide a secure supply of water for its customers. Today is an important milestone in a process that will allow them to expedite the schemes and actions that are required to ensure a resilient water supply and the much needed protection to our precious chalk streams.”

Milo Purcell, Deputy Chief Inspector at the Drinking Water Inspectorate said:

“Completion of development, assessment and decision processes for the accelerated gate one schemes marks a significant first milestone in establishing new arrangements for delivery of the major water resource solutions that are urgently needed to provide greater resilience for water supplies and improvements in the environment.”

Notes to editors:

  1. Final decisions – strategic regional water resource options at accelerated gate one
  2. West Country North Sources will move to Gate two of the standard gated process
  3. Section 20 – The Section 20 agreement with the Environment Agency (signed in March 2018) sets out how Southern Water will implement a long term scheme for alternative water resources  using “all best endeavours” to address deficits arising from abstraction licence changes (approved in March 2019) on the River Test and River Itchen.