In a focus report, Valuing every drop, Ofwat acknowledges a detailed regulatory approach can stifle much-needed innovation and calls for ideas to address the issues more effectively.
The report identifies the main areas of inefficiency as allocation of abstraction licences, lack of water trading between regions, leakage and customer usage.
Ofwat said: “Traditionally, government and regulators have responded to individual problems with individual solutions – such as leakage targets. This has often led to a detailed regulatory approach, which can stifle innovation, and distract regulated companies from delivering the best outcomes for customers. It makes more sense to find sustainable solutions that tackle the root causes of any problems.”
The regulator says its new approach is to create better price signals, introduce more choice and improve regulatory incentives for companies.