The water regulator Ofwat will be reviewed to ensure it is fit for future challenges of climate change and population growth, the government announced today.
The process will examine how the industry regulator works, whether it offers good value for money and if it is delivering what the government and customers expect.
The economic regulator was set up 20 years ago, at the time the water industry was privatised, to ensure customers receive good services at a fair price. The independent body can take action against companies that fail to deliver this.
Environment secretary Caroline Spelman said it is now time to review that function.
“Ofwat has been successful in holding down household bills while water companies invest in their infrastructure. But we need to make sure the regulator is in good shape to help the industry prepare for a changing climate and a growing population, at the same time as keeping bills affordable.
“It’s important to reassure water companies and bill payers that Ofwat provides good value for money by carrying out its duties without unnecessary red tape.”
The Department for the Environment Food and Rural Affairs has engaged David Gray to act as lead reviewer. Gray carried out the Department for Transport’s recent review of airport regulation. He is currently a non-executive director of the Civil Aviation Authority and a member of the Council of Management of the Regulatory Policy Institute.
Chair of the ICE water panel David Nickols said the review was welcome. “As ICE’s recent state of the nation report stated, the world we are living in now is very different to that when Ofwat was first set up and the regulatory framework must be reformed to reflect today’s environmental and societal challenges.
“The current investment plans do not do enough to address long-term needs, especially climate change issues including reducing carbon emissions and driving down demand. ICE fears that without significant change in the regulatory regime to drive appropriate long-term investment in sustainable infrastructure, our long-term water security could be severely jeopardised.”
The review team will call for evidence to give customers, water companies and their investors a chance to influence the review. The process will be completed early next year.
Defra is also due to publish a Water White Paper early next summer which will set out policies for the future of water management.