PN 20/20: Ofwat delivers draft decisions on strategic regional water resource options at accelerated gate one


Ofwat has today recommended that four strategic regional water resource solutions pass through accelerated gate one – its first checkpoint. This follows a comprehensive assessment by the Regulators Alliance for Progressing Infrastructure Development (RAPID) and agreement to the recommendations across all three regulators that make up the alliance.

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 proposed solutions 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 (proposed by Southern 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 raised concerns regarding the progress on key activities expected at this stage. For desalination and water recycling, it found that some elements of the expenditure had not been efficient, and not all of it should be allowed.

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

Southern has also indicated that completion of its three proposed solutions is currently not expected until 2028 or later. Without action to get the programme back on track, the end of 2027 timescale for delivery of alternative water resource (referred to in a Section 20 Agreement with the Environment Agency) will be missed – causing longer term environmental risk due to extended reliance on drought orders and permits as a means of topping up customers supplies.

Paul Hickey, Managing Director of RAPID said:

“Today marks a significant milestone supporting the collaboration which is happening across the sector to achieve both water resource resilience and wider public value. The innovative nature of RAPID has allowed three regulators to come together and agree these draft decisions.

We were pleased to see that all the submissions were on time and that the RAPID regulators, together with Natural England, were able to conduct such a thorough and co-ordinated assessment.

The draft decisions represent the first indication of whether the companies are on track in progressing work on the strategic resource options in a way that offers value to customers. While we have seen some encouraging signs of collaboration, companies need to continue to demonstrate that they can secure resilient water supplies and deliver benefits to customers, the environment and society as a whole.

We’ll continue to work with water companies to understand challenges and manage risks, and ultimately to drive forward solutions that promote the interests of customers and the environment both now and in the future.”

Notes to editors

  1. Ofwat’s draft decisions on Accelerated gate one solutions
  2. Letters to companies: Southern Water, Bristol Water, Wessex Water
  3. West Country North Sources will move to Gate two of the standard gated process
  4. Companies and other interested parties have until 31 December 2020 to make their representations following these draft decisions
  5. Ofwat will publish its final decisions on 28 January 2021
  6. Infographic explaining all four solutions
  7. The Regulators’ Alliance for Progressing Infrastructure Development (RAPID) was set up in 2019. It is a joint team made up of the three water regulators in England – Ofwat, Environment Agency and Drinking Water Inspectorate. They work with water stakeholders, taking opportunities to improve regulation and remove barriers, helping the sector respond to long-term water resources challenges while promoting the best interests of water users, society and the environment. The programme is intended to benefit Wales and England so RAPID is actively engaging with Welsh Government, Natural Resources Wales and companies serving Wales
  8. 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.