Water firms ordered to strengthen supply plans by Ofwat or have their profits slashed
Water firms have been ordered to toughen up plans to secure reliable services in the coming decades, in the Ofwat’s latest clampdown on the much-maligned industry.
If they fail to come up with more ambitious strategies, City PM understands Ofwat could cut the funding and profit allowances for suppliers for the upcoming price review.
Each water company has developed strategies for setting out how they ensure water needs are met through to 2050 and protect the environment, known as draft Water Resource Management Plans (WRMPs).
Last year Thames Water posted almost £400m in the six months to September and it was reported in February, that water firms had made £2.8bn in profit.
These draft plans are typically updated every five years to set out how water resources are managed and developed – to ensure households and businesses have a secure and reliable water supply over a 25-year period.
Options under consideration in current plans aim to increase supply including by cutting leakage, developing new reservoirs, promoting water recycling, new water transfers between companies and making operational improvements.
Companies are also working to improve water efficiency in households and businesses.
However, following Ofwat feedback, companies must now improve their final plans, due for publication in autumn 2023.
The regulator is challenging companies to develop more creative and innovative ideas and ensure they deliver best possible value for customers.
It has told companies they need to demonstrate how improvements will be delivered and that the costs are efficient.
Ofwat has also provided a series of assessments on each company’s plan to DEFRA secretary Therese Coffey.
David Black, Ofwat chief executive, said: “Customers depend on companies to provide reliable water supplies. This requires companies to prepare properly for population growth and the impact of climate change. Our assessment of draft plans shows that companies have more work to do to develop their proposals to meet future challenges. Companies must take the opportunity to revisit and strengthen their plans.
“However, we were encouraged by the level of collaboration companies have shown in delivering a first set of regional plans, in addition to their area-specific plans and look for more of this as they develop their final proposals.”
Final plans will be received by Ofwat in autumn 2023 and following assessment, the regulator will provide further feedback to the Secretary of State and Welsh Government.