Ofwat’s leakage policy not driven by headlines

Ofwat’s policy on leakage has been driven by a “considered view of evidence” rather than by national media headlines.

The regulator’s director for outcomes and customer engagement, Jon Ashley described leakage as a “high profile issue” for the water industry, which is “often in the media”.

Speaking in the tackling leakage session on the first day of Utility Week Live at the NEC in Birmingham this morning (22 May), Ashley cited examples including a burst water main in Wednesbury last month, which “turned a residential street into a river”.

He also discussed headlines about the impact of the Beast from the East and Storm Emma, as well as the subsequent thaw and the affect it had on leakage, mains bursts and supply interruptions.

Ashley, said: “These headlines illustrate that we’re talking about a very important issue, an issue that matters for our price review and for water resource management plans (WRMP).

“However, our policy for PR19 on leakage is of course not driven by headlines but by a considered view of the evidence on leakage and through consultation with our stakeholders.”

He added: “I’ve met with all the water companies over the last few months to understand their approach to customer engagement and I’ve picked up from them that leakage is as important in this price review as it was in PR14.”

Ofwat said both the UK and Welsh governments want to see leakage reduced and the issue relates to all four themes of PR19: great customer service, affordable bills, resilience in the round and innovation.

“There’s a strong link between great customer service and leakage. Companies are engaging with customers and many find their customers expect companies to reduce leakage in the future.” Ashley told delegates.

The regulator has challenged the water sector to reduce leakage by 15 per cent by 2025 and said it expects companies to make a “step change in efficiency”.

Ofwat has had a “mixed response from stakeholders” to the leakage challenges set out in the methodology for PR19.

“Some of our stakeholders recognised the need for an ambitious reduction, others had concerns over our approach,” Ashley said.

He stressed Ofwat has laid down “challenges” for leakage, which are “not requirements” for water companies.

However he said companies that consider they will need additional funding to achieve leakage reductions will need to submit a “very well-argued cost adjustment claim.”

Ashley added: “Customers expect reliable water and wastewater services to be provided by their companies with infrastructure that can avoid, cope with and recover from disruption.

“Managing leakage is important for delivering a resilient network in the long-term and reducing the risk of over abstraction of water resources – this will be important in managing future challenges such as population growth and climate change.

“We are genuinely encouraged by what companies are proposing in terms of their leakage performance commitments in their draft WRMP and we are looking for strong justification to the approaches companies are taking particularly those who seem less ambitious.”

The session also included water companies sharing some of the methods they have used to tackle leakage.

Rose Jolly, innovation manager – exploitation & governance at Severn Trent explained how the company used a data sprint and hackathon event to come up with solutions.

She said: “If we’re going to meet the targets we really need to meet, we’re not going to get there by doing the things we’ve always done.”

Anglian Water’s head of innovation, Steve Kaye told delegates about the company’s “Innovation Shop Window” project, which it hopes will be able to “accelerate innovation” by focusing on a small area first.