Water regulator Ofwat is considering whether to separate and stagger the regulation of water and wastewater services.
Supply chain trade body British Water presented the idea to Ofwat earlier this month, and said the idea would flatten out the peaks and troughs in capital spending.
Ofwat received the idea positively, said British Water director Paul Mullord. “They were keen to look at it further,” he said.
British Water said that separating and staggering water and wastewater price reviews would significantly level out the spending highs and lows caused by the water companies’ five year Asset Management Plans (AMPs). AMP spending is determined by five yearly price reviews conducted by Ofwat.
Ofwat has resisted proposals for staggered price reviews on the grounds that they would make it harder to compare the performance of water companies.
Mullord said separating water and wastewater would remove that problem.
“The idea is not new but little has changed in the 20 years since privatisation,” he said. The two services are presented separately in Ofwat’s financial performance and expenditure (FPE) reports, so it would not be difficult to separate their regulation, he said.
Built asset consultancy EC Harris partner Greg Bradley said the idea could be successful, but fails to address the fact that Ofwat’s one-size-fits-all approach to regulation creates inefficiencies.
He said it would be better to have a system where AMP periods for individual water companies are lengthened or shortened depending on their performance. This would mean that those performing badly are more heavily regulated, and those doing well are subjected to fewer price reviews.