Defra ready to consult on Ofwat SPS

Defra has said it is preparing to launch a consultation on its Strategic Policy Statement (SPS) later this month to inform the next water sector price review.

Ofwat will set the framework for PR24 based on the SPS, which is due to be published following the consultation in early 2022 according to deputy director of water quality Kirstin Green speaking at the All-Party Parliamentary Group on Water.

The SPS sets out the government’s priorities for Ofwat’s regulation of the water sector in England. The regulator then carry out its functions in line with the objectives of the statement.

Together with the Water Industry Strategic Environmental Requirements (WISER), the Water Industry National Environment Programme (WINEP) is being revised ahead of PR24. Green said a consultation on the changes will begin in the next few weeks.

Principles for public value

Meanwhile, Ofwat has published seven guiding principles for embedding social and environmental value into everything the water sector does.

The regulator set the principles following a consultation that highlighted the range of variables companies face regionally as well as differences in resources and capabilities meaning community and environmental needs are different for each company.

The principles are:

• Companies should seek to create further social and environmental value in the course of delivering their core services, beyond the minimum required to meet statutory obligations.
• The mechanisms used to guide activity and drive decision-making should facilitate the delivery of social and environmental benefits that are measurable, lasting and important to customers and communities.
• Companies should be open with information and insights on operations, impact and performance.
• Delivery of public value outcomes should not come at greater cost to customers without customer support.
• Companies should consider where and how they can collaborate with others to optimise solutions and maximise benefits, seeking to align stakeholder interests where possible, and leveraging a fair share of third-party contributions where needed.
• Companies’ public value activities should not displace other organisations who are better placed to act.
• A company should take account of its capability and circumstances in scoping the delivery of greater public value.

Former chief executive Rachel Fletcher had floated the suggestion of public purpose being embedded in companies’ licences but said that would only happen if there was appetite from the sector. Some organisations opted to formalise their social commitments.

“There are many great examples of public value already being delivered across the sector – and we are seeing further thinking on this through companies’ green recovery proposals, the innovation programme and early thinking around the next price review,” Jenny Block, Ofwat senior director, said.

“We believe these principles provide a framework that can help ensure water companies provide greater public value across all that they do long into the future. We look forward to exploring these principles further with companies and other interested parties.”

The consultation responses led the regulator to adopt a flexible approach while providing a framework, to help drive a level of consistency.

Ofwat noted how fragile the delivery of public value and stakeholder perception can be and that public trust should not be taken for granted.