Leader: water companies must match Ofwat’s vision

And so to the launch of Ofwat’s strategy last Wednesday, the oddest regulatory unveiling Utility Week has ever been privy to. Given the heavy trailing of the strategy, based on “trust and confidence”, the audience was expecting few surprises. They were wrong.

Instead of the usual document doubling as a doorstop that regulators offer, Ofwat had a jolly cartoon and a clutch of speeches by some of its most outspoken critics. It was unusual and, one imagines, a deliberate attempt to provoke a reaction from an audience the regulator considers at risk of complacency.

Ofwat is being very smart. With PR14 drawing to a close, the real reform of the water sector now begins. The opening of the market to competition and the conversations that must be now be had around resilience and abstraction and upstream reform are potentially explosive.

Last time the regulator attempted major reform, on a much smaller scale, the sector went into meltdown. The spectre of ­Section 13 was hovering above this feast, with both the regulator and the companies acutely aware that this time they must have a constructive and mature process that avoids the mistakes of the past.

By bringing its critics inside the tent, Ofwat effectively disarms its opponents and ensures genuine debate – debate that goes further and faster than if the companies themselves were in the driving seat.

As consumer advocate Sharon Darcy said on the night, the challenge now lies with the companies to step up and participate in the debate – and that means challenging and even disagreeing with the regulator in public, on occasion.

That’s a huge departure from the regulatory relationship of the past, and yet another challenge for management teams already dizzy with cultural and organisational change.

It is also the right thing to do and, with a bit of luck, an approach that will keep the water sector safe from the kind of political intervention and imposed change now facing energy.