Ofwat sets out PR19 resilience expectations

New report and cross-sector event explore “resilience in the round” challenges

Ofwat will set out its expectations for water company resilience in the upcoming price control today at an event in London.

The regulator has invited senior executives from water companies to hear from leaders in parallel sectors, such as food and drink, manufacturing, and aerospace and defence about how they approach long term resilience challenges, including resource security, climate change, and cyber security.

Speaking to Utility Week ahead of the event, Ofwat’s senior director for strategy and planning, John Russell, said that an awareness of resilience best practice in other sectors will help define resilience leaders and laggards in PR19.

In an Ofwat statement, he added: “Given the crucial service they provide to their customers, water companies must ensure they are thinking long-term about resilience – operational, financial and corporate. They must ensure they are prepared for the many – often unpredictable – challenges the future may hold, such as climate change, cyber-attacks or extreme weather events.”

Ofwat will also use today’s event to launch its new report, Resilience in the round: Building resilience for the future, which offers “food for thought” on the factors which will be most important for strong resilience performance over the next price control period and beyond. These factors include disciplines such as systems thinking, as well as smart resilience and the role of customers in delivering resilience.

Resilience is a key theme in Ofwat’s draft methodology for PR19, which was published last month and introduced the concept of “resilience in the round” – which includes operational, financial and corporate resilience considerations.

PR19 will be the first price review to formally assess companies on their resilience ambitions. The confidence of resilience strategies in company business plans will be an important determining factor in final determinations for AMP7.

Ofwat’s new report warns that companies will need to go beyond traditional “risk management” approaches in order to impress the regulator with their resilience plans. 

“Risk management and resilience require different approaches, and we expect companies will need to adapt their approach to corporate, financial and operational planning to achieve resilience in an ever-changing world,” says the report. “At the 2019 price review, part of the initial assessment of company business plans will be how companies demonstrate an appropriate planning approach to resilience management.”