David Black has expressed concerns over water companies’ long-term resilience planning for the next 25 years.
Ofwat’s chief executive called on companies to ensure that they adequately demonstrate how customers have been engaged with in relation to the impact long-term strategies will have on bills.
Black wrote to companies reflecting on their resilience planning and commended companies for communicating with customers on ambition, but said this was focused on priorities, rather than costs of achieving them.
He said companies need to link their proposed performance commitment levels at PR24 with longer term strategies and provide evidence of how these relate to customer priorities.
Investment plans should set out “low-regret, best value” options to meet pressing short-term challenges but keep options open to minimise costs in the future.
Black called for alternative pathways, with specific trigger points, if enhancement investment is dependent on certain circumstances.
He said strategies at present did not all meet Ofwat’s expectations for low-regret investment and should expand their options beyond using a only “benign scenarios”.
“This approach is not acceptable, as if more adverse futures come to pass, the costs of meeting long-term outcomes could be much higher,” Black said.
One area of significant uncertainty was highlighted as abstraction reductions, therefore Black urged that plans defer to Ofwat scenarios and regional water resource plans.
“The core pathway,” Black said, “should include activities required across a wide range of plausible scenarios, or to meet short-term requirements, or to support future options.”
Strategies should clearly reflect UK government’s principles for adaptive planning and adopt them where there are efficient options to meet long-term outcomes using flexible, modular or adaptive solutions where investments can be scheduled for later in the timeline to give greater certainty about what is required. However, Black added that investment should be brought forward where it can create flexibility.