Water industry regulator Ofwat has published a consultation on its plans to free water companies from excessive regulatory work, in line with government recommendations made in July.
The Department for Environment, Food and Rural Affairs (Defra) said in July following an independent review of Ofwat that there was no need for major change to the regulatory system, but that Ofwat should seek to reduce the burden of regulation it imposes on water companies.
Ofwat has now published its plans to achieve this by asking water companies to develop systems and assurance processes to monitor their own performance, rather than submitting a June return to Ofwat — an annual document containing data, board opinions and independent engineering assessments that was previously collected and published by Ofwat. This year, Ofwat has already made a change by asking companies to publish their own June returns without going through Ofwat.
The second part of Ofwat’s plans is for the regulator to adopt a new system to guide its decisions on how to act when it identifies a possible need for intervention in water companies. The system will help Ofwat to judge whether to take action, and whether to do so informally or formally and dedicate significant resources to doing so. The assessment would look at the benefits and costs of regulatory action — including the potential benefits to customers of acting, the risk to customers of not acting, and what costs the extra regulatory burden would incur for the companies and their customers. Under the new plans, any action judged to impose a significant regulatory burden would need senior level approval within Ofwat for it to progress.
- Ofwat’s full consultation document can be accessed here.