Ofwat goes under Defra microscope

Ofwat faces a major shake-up following Defra’s decision to review the water industry regulator’s role and remit to ensure it can meet the challenges facing the sector. It is the first time since the water sector was privatised more than 20 years ago that Ofwat has come under scrutiny, and a final report is expected early next year.

Environment secretary, Caroline Spelman, explained: “Ofwat has been successful in holding down household bills while water companies invest in their infrastructure. But we need to make sure the regulator is in good shape to help the industry prepare for a changing climate and a growing population, at the same time as keeping bills affordable. “It’s important to reassure water companies and bill payers that Ofwat provides good value for money by carrying out its duties without unnecessary red tape.” The review has been welcomed by the industry. David Nickols, chair of the Institution of Civil Engineers’ water panel, said: “As ICE’s state of the nation report stated, the world we are living in now is very different to that when Ofwat was set up and the regulatory framework must be reformed to reflect today’s environmental and societal challenges. “The current investment plans do not do enough to address long-term needs, especially climate change issues including reducing carbon emissions and driving down demand. ICE fears that without significant change in the regulatory regime to drive appropriate long-term investment in sustainable infrastructure, our long-term water security could be severely jeopardised.” David Gray has been brought in by Defra to lead the review. The review team will call for evidence to ensure customers, water companies and investors can voice their views. Defra said the review will examine the role of Ofwat including its objectives, responsibilities, and how it will meet future challenges and ensure value for money. The review will reflect on: • The Government’s objectives for independent economic regulation of the water sector • The boundary of responsibility between the regulator and ministers • The statutory framework that Ofwat operates in • Examine Ofwat’s governance and decision-making processes, and its relations with other water regulators and water and sewerage companies Defra’s Water White Paper, due to be published next summer, will set out policies for the future of water management.

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