Looking to the future
The UK faces a number of challenges in securing an efficient, reliable water resource. For instance, the impact of climate change means that water scarcity will become an ever increasing reality, impacting some regions of the country more than others.
This means we will have to be innovative in how we respond to these issues.
You will find listed below a number of consultation papers we have written or commissioned to help us address these challenges.
Challenges such as climate change and population growth mean that creative and innovative solutions are required to ensure a reliable, resilient and affordable services in the future. Utilising markets is one such solution and PR19 saw a number of steps to promote the greater use of markets within bioresources. We have considered potential options to further develop market participation within bioresources. Within this paper we have assessed these options, identifying a package of measures that could be taken to utilise markets to support the delivery of better outcomes.
There is widespread agreement that the time is right to evolve the WINEP to enable the water industry to deliver greater value for every pound spent. This has led to Defra, Ofwat and the Environment Agency coming together to lead a cross governmental review of the WINEP process. Building on United Utilities’ experience of implementing a Catchment Systems Thinking (CaST) strategy, this discussion paper proposes three key principles, which aim to better support the industry in delivering greater value.
The overall health of water company assets is of interest to customers, companies, regulators and other stakeholders. We all want confidence that the health of our assets is adequate to ensure service and environmental performance can be sustained and enhanced, that our systems are resilient to the increasing frequency and severity of external shocks and stresses (such as climate change) and that the costs of maintaining our assets are being fairly split between current and future generations. Its complexity and lack of a simple consistent metric makes collaboration and benchmarking across the sector difficult. This document presents our view on how a coherent asset health framework could be developed that would be invaluable in enabling a mature conversation between companies, customers and regulators about the concept of risk.
Ofwat has proposed to undertake a collaborative, nationwide approach to customer research at future price reviews. Whilst we believe that other options for change could also effectively address some of the lessons learnt from the PR19 process, we agree that some degree of national customer research could play a role in future prices reviews, if appropriately specified and delivered. It is essential that companies are directly involved in the development of such research in order to get the benefits of collaboration and ensure that they support the results. Without this companies would not have ownership of their business plans, and would not have confidence that plans reflected customer priorities. We have set out in this paper a number of key elements which we believe will lead to effective national customer research results that all stakeholders have a greater chance of being able to endorse.
The Principles of Regulatory Cost Assessment
Cost assessment is the process by which our regulator, Ofwat, sets our efficient level of cost at each price review. This paper draws upon our experience of PR19, the subsequent CMA appeals and a look ahead to PR24 to establish six basic principles for cost assessment. Download the paper here (PDF 976 KB opens in a new window).
What lessons can we learn from cost assessment at PR19?
In the paper above, we set out six key principles for regulatory cost assessment. In this paper, we apply these principles to some key areas of the PR19 cost assessment framework and ask what lessons we can learn for PR24 as a result. Download the paper here (PDF 1,353 KB opens in a new window).
Making the cost assessment framework resilient to future challenges
In this paper, we consider the key challenges facing the sector and suggest practical solutions that could be adopted at PR24. Download the paper here (PDF 1,621 KB opens in new window).
In the context of water management, nature-based solutions (NbS) are an umbrella term for a range of activities which utilise natural processes to provide water-related ecosystem services and benefits, either through raw water protection, wastewater treatment or flood mitigation. Many of these are well-documented and are not new; however, the potential of this approach in driving improvements to the water environment has not been fully realised. This paper aims to: identify and summarise the key barriers to large-scale implementation of NbS by water companies and other beneficiaries of the ecosystem services provided by NbS; to recommend actions to overcome those barriers; and to propose practical next steps to deliver recommendations, to be delivered by water companies, regulators, NGOs and multiple stakeholders, working together across a number of sectors to deliver a national programme of work for enabling NbS at scale. Download the full paper here (PFD 2.3MB opens in a new window).
The bioresources industry needs to enter an unprecedented period of change, in order to respond to regulatory reforms driven by environmental concerns and economic drivers. However, the degree of uncertainty about the timing, coordination and impact of reforms means that, rather than being able to deliver changes to bioresources management in the short, medium and longer term, there is a risk that the industry becomes stuck in a state of inertia. We believe that the sector has reached a critical point and it is clear that greater understanding and consensus over the future direction of the sector is required. We believe there is a compelling need for the development of a national long-term bioresources strategy and this is required quickly, well ahead of the next price review (PR24). In this discussion paper we set out our proposal for development of a holistic bioresources strategy and ask that Defra, EA, Ofwat, water industry and other key stakeholders come together to set out the programme to develop this strategy and agree an action plan to ensure we realise the opportunities we have to deliver continual long-term value from bioresources.
Download the full paper: Unlocking greater value through a national bioresources strategy
This paper considers how Ofwat’s PR24 incentive regime can best help companies to tackle the issue of storm overflows in AMP8 and beyond. Download paper here (PDF 856KB opens in new window).