South East Rivers Trust

Ofwat’s assessment of water company business plans call for price cuts – but will it ultimately be the environment that pays?


Last year we called on you all to respond to your local water company’s Water Resource Management and Business plan consultations. Collectively, these will lay out the water company’s investment for the next five years, as well as the long-term plans to manage water as a resource for the next 60 + years. These plans were submitted to Ofwat – an organisation that oversees the water industry since its privatisation.

If you need a reminder, you can read the first blog here.

Given the very service water companies provide to us is freshwater, and that this water comes from the local environment, it is not an understatement to say that these plans will ultimately shape the health of our rivers and streams for the next 60 years.

Ofwat have since reviewed the plans and published their initial assessments earlier this week – and here it is:  

What does this mean?

For the south east, no water company has had their plan “fast-tracked” by Ofwat. This means there is more work to do on all the plans to satisfy the high standards set by Ofwat to deliver more for their customers, for less.


“We set high expectations for water companies at PR19. We pushed them to go further than ever before, improving efficiency, customer service and resilience. We asked them to share financing gains with customers and to ensure that dividend and executive pay policy is aligned to delivering for customers. We asked them to look well beyond the five-year price review period to meet needs of future customers and protect and improve the natural environment.”

Ofwat

SES Water and South East Water plans are being slow-tracked. Ofwat is calling for SES Water and South East Water to reduce the cost of their 2020 – 2025 business plans, stating that the current plans are 20% above Ofwat’s view of what is justified and efficient.

Affinity, Southern and Thames Water are all under significant scrutiny, meaning their plans need substantial changes and will be under closer review. Ofwat is again calling for the companies to cut costs, but also expressing concerns over their abilities to deliver the outcomes for customers, and to provide a resilient service.

You can read more detail on Ofwat’s assessment by water company here.

The Trust’s Perspective

Last year, we set our own high standards for the water companies in our area. We called for them all to do more to protect the rivers and streams they rely on for their services. We called for them to stop abstraction in vulnerable areas like our precious chalk streams and be ambitious in targets to reduce the water wasted by leakage. On the sewage side, we called for the wastewater companies to invest in upgrading their aging infrastructure to reduce the pollution entering our environment every day.

From Ofwat’s summary report, it seems water companies across the UK heard our pleas and those of their customers, with some good commitments made to improving the environment included in the business plans. Across business plans submitted to Ofwat, water companies committed to:

  • Reducing leakage by 15 %
  • Reducing the need to take water out of the environment in our most at-risk areas – like our vulnerable chalk streams
  • Improving 8,000 km of river
  • Reducing all pollution incidents collectively by 37% and the worst performing companies by up to 80%
  • Development of natural capital accounts by several companies
  • A significant number of extra catchment management schemes and investigations, above the statutory Water Industry National Environment Programme (WINEP).

Whilst we think many of the plans could have gone further, being even more stretching and ambitious, this all requires significant capital investment. We are concerned that if Ofwat is asking companies to cut the cost of their plans, this could lead to reduced investment in measures that enhance the environment.

In response to Ofwat’s assessment, Michael Gove wrote a letter to Water UK to reiterate the Government’s expectation that water companies & their business plans will contribute positively to the environment. Read the full letter here.

What can you do?

Let your water company know the environment is still a priority for you.

You can do this by keeping an eye out for further consultations on the revised plans – and we will highlight these to you as well. You could also send a letter directly to your water company outlining your concerns.

If you get the chance, talk with your MP. Express your concerns to them about the consequences of reduced investment from water companies and ask them to encourage Ofwat to help water companies produce realistic, cost-effective plans that vastly contribute to improving our environment.

Have any Question or Comment?

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.