Ofwat has expressed disappointment at water companies’ progress in efforts to develop inter-regional transfer infrastructure.
In its response to the House of Commons Environment, Food and Rural Affairs (Efra) select committee’s recently published report on water regulation, the industry regulator backs the “important role” transfers can play in ensuring efficient and resilient supplies.
But water companies have done too little to develop a new water grid that would enable supplies to be shifted from areas where water supplies are abundant to those at greater risk of shortages, says Ofwat.
“We have made it clear to water companies that we are disappointed in the progress in this area and believe that there are economic, environmental and resilience benefits to be achieved from planning more effectively across company borders.”
Ofwat identifies coordination of suppliers, environmental and water quality constraints, and commercial practice as the key barriers to greater trading of water.
But the regulator says that there is “no justification” to strengthen existing financial incentives for companies to trade water, which were introduced in the industry’s last price review in 2014.
Instead, together with the government and the Environment Agency, Ofwat says it has challenged companies to step up their efforts to regionally coordinate the planning of water resources.
These include moves by Ofwat to forge a regulatory alliance to assess multi-company infrastructure options.
The National Infrastructure Commission backed the establishment of a national water network last year to increase the volume of water transferred between company areas.
In its response to the committee, the Department for Environment, Food and Rural Affairs (Defra) says water companies are expected to take “all reasonable steps” to pursue transfers where this is the most efficient way of addressing future needs.
Ofwat also told the Efra committee in its response that suppliers can improve their complaint handling procedures.
The regulator says there is a “variance” between complaint mechanisms in water compared to other comparable sectors, such as the lack of a referral to a third party where gripes have not been resolved within a given period. It says there is “scope” to improve the overall complaints process for water customers.
Water UK is investigating the alternative dispute resolution mechanism (WATRS) as part of an independent review of the post-company complaints handling processes encouraged by Ofwat.
Ofwat urges the sector to be “swift and ambitious” in taking forward the recommendations of the review, which will inform the re-tendering of the contract for WATRS.
Water UK was contacted for comment but was unable to furnish a response in time for the publication of this article.