Reflecting on the redeterminations by the Competition and Markets Authority, Ofwat has proposed new techniques for companies to report on leakage to give the regulator a clearer picture when setting performance levels and cost allowances for the next price review.
Companies may be asked to explain how leakage reductions are achieved through each activity such as pressure management, proactive repair methods and water metering.
Ofwat proposed the changes as part of a consultation on how water companies provide data on leakage, phosphorus removal, operational and embedded greenhouse gas emissions for their annual performance report.
The regulator said its re-examination of costs for leakage and phosphorus removal schemes is in response recommendations made by the CMA and part of its final ruling earlier this year on the appeal by Anglian, Bristol, Northumbrian and Yorkshire Water of their PR19 determinations.
On leakage, the CMA said more detailed data on efficient costs of leakage protection, detection and reduction were required. It suggested a bottom-up approach to setting cost allowances rather than the top-down method Ofwat had used at PR19. For setting leakage levels for PR24, Ofwat said more consistent, granular information than it previously collected will be required and proposed companies should report the cost, leakage saved and scale of each activity undertaken to reduce or maintain leakage.
The consultation noted the reporting consistency challenges due to differences between companies. However, Ofwat recognised the need to develop better data and explore what comparisons can be made in time for PR24.
The CMA also suggested Ofwat compares differences in company forecasts, allowances and delivered costs for phosphorus removal schemes when setting costs in future price controls.
Elsewhere, companies will be expected to deliver updates on progress of their green recovery schemes alongside their annual report to the regulator. Ofwat will use updates and learnings from this to support the PR24 business planning process.
It proposed changes to greenhouse gases and bioresources objectives for 2021/22 reporting onwards. Companies will be asked to submit transparent accessible data on operational and embedded greenhouse gas emissions to allow for greater scrutiny by Ofwat and stakeholders, and to inform investment decisions in the run up to PR24.
Reporting on embedded emissions will be the first step in enabling the sector to develop strategies for their reduction.
Ofwat proposed that standardised reporting of operational emissions will be mandatory from this year and for embedded emissions from 2022/23 onwards. Companies will be asked to report on gross and net greenhouse gasses for water and wastewater, broken down by carbon dioxide, methane and nitrous oxide.
Annual reporting is used by Ofwat to understand progress the sector is making to improve its performance and towards meeting long-term aspirations.
The consultation runs to 8 July.