Ofwat have released their 2020-21 draft forward proposal, laying down 12 ambitions that both the regulator and water companies in the UK will seek to achieve over the course of the coming year.
This latest document from Ofwat comes in the wake of December’s PR19 review into the water industry in the United Kingdom. PR19 laid down what each water company must do over the course of the next five years.
Targets within the report included a 12% reduction in the cost of consumer bills, cutting leaks by 16% and pollution incidents by 30%. It also laid out a £13 billion investment in new and improved services to cope with the impact of climate change and population growth.
— Ofwat (@Ofwat) January 9, 2020
Ofwat’s 2020-21 forward proposal lays out how the industry will begin working towards those aims between April 2020 and April 2021, the first year of the five-yearly cycle.
The final 2020-21 forward proposal will be released later in the year once a consultation period has taken place, but the draft from Ofwat lays out the following ambitions for water companies in the UK:
Drive water companies in the UK into delivering improvements for customers
Ofwat have said that they want to develop a greater understanding of UK water companies’ performances. This in turn will allow Ofwat to impose recommendations and measures which can help improve services for customers.
Interestingly, Ofwat’s 2020-21 forward proposal says that the water regulator “will take swift and targeted action – including using our formal enforcement powers as appropriate”. Such tough language should leave water companies in no doubt that Ofwat is going to get serious over the coming years.
Use markets to deliver more
Ofwat believe that they are already seeing the benefits of deeper intergration between developer and business water markets and consumer markets. The regulator wants to work more closely with MOSL who operate the retail water market in England to build on this relationship, helping to drive further innovation to address environmental issues and population growth.
Work with other bodies on environmental issues
MOSL aren’t the only body that Ofwat intends to work more closely with over the course of the next year. The regulator will also be teaming up with the Environment Agency, the Department for Environment, Food and Rural Affairs and Natural Resources Wales to find ways in which the environment can be better protected.
Build stronger partnerships across the board
Ofwat will also set out to build stronger partnerships with other regulators, consumer bodies and government departments. The water regulator has opened its first Welsh office to oversee water companies in Wales and it wants to learn more about how other industries are regulated and what lessons there are for the water sector.
Launch the Ofwat Innovation Fund
Another of the headline grabbers in the PR19 review was the creation of an innovation fund with £200 million up for grabs through a competition.
Water companies are to be encouraged to collaborate with each other and other companies within their supply chain to come up with new ways to reach the targets laid in PR19, such as leak reduction through pipe repair and cheaper bills.
Ofwat have said that they expect to have full details of the innovation competition confirmed between January and March 2021.
Work on infrastructure projects to improve water supply lines
The Regulators Alliance for Progressing Infrastructure Development has devised a range of projects for inter-regional water transfer to help cope with population growth and shortages in certain areas of the country.
One such example of RAPID’s work is the scheme to construct a 310 mile pipeline between Lincolnshire and Essex. This will allow water to be transferred from rural reserves in the north of the country to the more populous south.
Ofwat will work more closely with RAPID on future projects which will help the UK to overcome challenging conditions and keep water affordable.
Improve the UK’s long-term resilience
Ofwat are to set up frameworks which will allow water companies in the UK to better predict the impact to their services of climate change. By assessing the long-term challenges that the sector will face over the next 5-10 years, the United Kingdom will be more prepared for those issues when they arise.
Embed public values into water companies in the UK
Ofwat wants to help water companies in the UK better reflect public values in their approach. Not only will this help consumers feel a deeper connection with the sector, but it will also help the water industry become a more attractive proposition for potential investors.
Evaluate the role and approach of Ofwat
Comparing and contrasting the PR14 review with the PR19 review and the progress made in the intervening years will allow Ofwat to evaluate its approach as a regulator going forward. If Ofwat can improve the effectiveness of their own performance, then they’ll be in a much stronger position to assess the performances of water companies in the UK.
Develop new regulatory tools
Ofwat are developing new regulatory tools which will allow the regulator to better assess the contribution to society and the environment of each of the water companies in the UK. With these tools, Ofwat can then incentivise the water industry to provide greater value to consumers.
Make greater use of data
Ofwat have taken steps to set up a data strategy which will allow the water regulator to take advantage of new technologies and become more efficient.
Listen more to the public
Ofwat wants to better understand what the public want and expect from the water sector. The regulator has set up a consumer research function to receive feedback from consumers which can help to shape the industry going forward.
You can read the full Ofwat 2020-21 draft forward proposal on the Ofwat website. The water regulator is inviting comments on the proposed programme with the consultation period open until Friday 21st February.