Ofwat demands water efficiency progress

As water companies in England and Wales enter the third year of the current asset management period (AMP7) the regulator has said it will review the price cap for retailers and called on the sector to do more to address combined sewer overflow (CSO) spills and encourage water efficiency.

In its forward programme for 2022-23, Ofwat set out its priorities for the year ahead and discussed developing the framework for PR24, including encouraging the use of alternative investment opportunities. It said the sector should be focussing on long-term delivery and environmental sustainability.

It said the methodology for PR24 will require companies to “address robustly” the affordability of their business plans, which may require new models of delivery that offer better value for billpayers.

The 2022-23 plan called on water companies to show they are making “material progress” on how consumers are being encouraged to use less water. Ofwat said it wants this year to see “a sharp focus on demand side solutions, including water efficiency measures”.

Last month’s Waterwise managing director Nicci Russell highlighted at the organisation’s spring conference that water efficiency remained somewhat niche among government and regulators. She said it was time for water to be central in development and planning discussions.

Ofwat’s interim chief executive David Black said the regulator would review the business retail price caps and explore how the supplier of last resort arrangements in the non-household market can be strengthened.

It is working with operator MOSL to reform the business retail Market Performance Framework (MPF) that will be implemented from next year. Ahead of that, Ofwat said it would introduce a “more holistic approach” to monitoring and strengthening company performance. MOSL has undertaken research and laid foundations for open data, which Ofwat said it would evaluate the progress of later this year in the autumn.

The regulator commended progress made to reduce leakage rates after this was heavily incentivised at PR19. Asset management and addressing discharges from combined sewer overflows (CSOs) will remain a priority to push improvements on.

In preliminary announcements on the PR24 framework, Ofwat said business plans should be viewed as five-year building blocks within longer term strategies it added that investment should be adaptive depending on progress and changing factors from climate change with “clear triggers and decision points” to choose the best options at the right time to deliver on long terms plans.

Ofwat said it wants to use competition for the market where appropriate for major infrastructure projects using direct procurement for customers (DPC) to create opportunities for investors. Over this this, to enable this it will examine what needs to be done to encourage competition in this area to provide strategic infrastructure.

CCW, the water watchdog, has also released its annual plan, which proposes a sector-wide campaign to raise awareness among household and business consumers of the value of water and how everyone’s behaviour impacts the environment.

The body is also targeting a 10% reduction in the number of complaints it receives during the year to March 2023. Next year it will publish a report reflecting on the first five years of the open water retail market and how it has delivered for business customers.