Water companies face radical changes ahead of 2020

Upstream reform and water trading are among the radical changes on the table for the water industry this week, as Ofwat invites companies to comment on a series of discussion papers setting out the industry’s future.

Companies have been asked to find ways of delivering “more for less” and to use “scarce resources more smartly”, which potentially includes a radical change to the way the companies work across boundaries.

The papers also provide some details of the next price review, PR19, including a promise to provide industry with details of the process earlier than in PR14, and the suggestion of longer-term targets and rewards, stretching beyond the traditional five-year AMP cycle.

One of the options Ofwat has invited discussion on is greater separation of price controls. This could allow the creation of “bespoke” price controls for certain areas, include sludge treatment. Deregulation in certain areas has also been mentioned as a way to "encourage innovation”.

Another option open for discussion is the possibility to extend the use of the competitive tendering as used in the development of the Thames Tideway Tunnel for the construction of other assets. This could then provide “real market evidence” that the assets being developed are delivered efficiently.

Ofwat acting senior director for Water 2020 David Black told Utility Week: “The aim of this is to produce a more responsive sector that is able to deliver more for less.

“Unless we create a more innovative, more flexible sector, we are not going to meet customer expectations or the challenges the sector faces in the future.”

Ofwat chief executive Cathryn Ross said: “If we are to maintain trust and confidence in these vital public services, providers need to deliver better services that are better value for money, while also using scarce resources more smartly and working better for our natural environment.”

She added that she wants to see water trading as this could “help some companies avoid the costs associated with expensive new storage capacity and keep bills down”.

Responses to the discussion papers are due by 10 September 2015 and these will feed into the initial PR19 proposals which will be published before the end of the year.

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