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Nature-based solutions should be central to the water sector’s business plans for the next regulatory cycle in 2025, according to Ofwat chief executive Rachel Fetcher.
Speaking at a Moody’s event on meeting future customer needs, Fletcher said Ofwat is actively working to remove any regulatory barriers that impede the implementation of nature-based solutions for PR24 and hoped to see these “by default”.
She added that the sector needs a clear, commonly held picture of the water industry of the future to enable coherent long-term planning across water and waste.
However, Fletcher said it is clear the industry needs to make plans now for net zero and the pathway to reaching it cannot be put off.
Ofwat expects every water company to be able to share what their pathway will look like in their PR24 business plans for AMP8, which runs from 2025-30.
Fletcher said the regulator is working with Environment Agency and government to set long term targets to help clarify what the “destination” will look like.
As Ofwat embarks on designing PR24, Fletcher said there will be greater incentives for companies to “turn long-term thinking into action” woven into the regulatory arrangements.
Speaking at the same event, Luis Correia da Silva, head of corporate finance and regulation at Oxera, warned that the industry is at a critical junction and had to balance water scarcity, asset resilience, climate change with affordability versus investment.
He said significant investment would continue to be needed to maintain assets and highlighted the approach of the Water Industry Commission for Scotland (WICS), which last week published its draft determinations for Scottish Water. It suggested trebling investment was necessary in the next 25 years to meet the challenges of resilience and maintain the aging asset infrastructure.
Speaking to investors, Fletcher said the sector needed input from those who will help companies reach the as yet unknown future, but warned potential shareholders that they, not customers, must be prepared to pay if company assets become run down.
To better understand the condition of assets, Ofwat will be reaching out soon to companies for information on their approach to managing the risk of asset failure, Fletcher said.
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