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Ofwat has proposed a new approach to monitoring and regulating operational resilience as it takes a longer-term view of sector-wide challenges.
The regulator said this will include asking water companies to report on a series of new measures covering asset health, unplanned maintenance and equipment failures that will eventually be consolidated into an “integrated monitoring framework”.
Ofwat said its current approach focuses on “a range of service performance measures complemented by a small number of asset health performance commitments that provide some information on operational resilience.”
“While the outcomes regime does capture a company’s failure to mitigate risks when they have an impact on service, it focuses on performance at a point in time,” it added. “Therefore, it may not always provide breadth and depth of information needed to gain insight into the effectiveness of a company’s approach to maintaining assets or managing current and future risks.”
The regulator said it wants to provide “a richer picture of operational resilience” by developing an integrated monitoring framework that is “informed by the outcomes regime and complemented by wider monitoring activities.”
Ofwat said this new framework will raise confidence and trust in the sector to deliver reliable services, improve the identification of long-term risks to resilience, and enhance transparency at a time of growing public concern over sewage discharges.
It said the new approach will also drive innovation and collaboration, including the sharing of best practice, and shift the focus away from least-cost solutions, instead encouraging greater consideration of environmental and social outcomes and promoting nature-based solutions.
Ofwat has proposed an iterative three-step process for implementing the new framework.
In the first stage, covering this year and next, the regulator will explore and test both new and existing measures for monitoring the health and performance of assets.
As part of this, all water companies will be asked to report on two new measures concerning asset health and unplanned maintenance at water treatment sites. Those companies that also provide wastewater services will additionally be asked report on three new measures concerning asset health, unplanned maintenance and equipment failures at wastewater treatment sites.
For the second stage, covering the years 2022 to 2025, Ofwat said it will “refine and improve” its monitoring activities, including the new measures proposed in stage one, to gain a greater understanding of the causal relationships between asset and system resilience. The regulator said it will additionally develop further new measures to collect a more diverse range of information.
“This stage is critical in enabling us to focus policy development in areas that will challenge companies to horizon scan for future risks and opportunities, better understand the health of their assets and adopt a strategic and long-term approach,” it explained.
In the third stage, starting in 2026, Ofwat will consolidate its monitoring and reporting activities into an integrated framework that could be applied from 2028 onwards.
The regulator said it will consider how new ways of working and technological developments can inform or form part of the framework. It said data sharing and transparency will be an important part of the framework to enable to customers and stakeholders to access comparative information.
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