The future looks challenging

As the water industry embarks on its largest programme of investment, ever, Rob Ashley, Ofwat's director of policy & communications, looks to the future.

We have come a long way since the water and sewerage sectors were privatised. In 1989 polluted beaches and rivers, and a neglected infrastructure meant we were seen as the 'dirty man of Europe'.
In 1990, less than 80% of England and Wales' bathing waters met the required standards. Privatisation of the sector sought to tackle these challenges head on.

We now have salmon in the Mersey, more than 100 Blue Flag beaches, and our drinking water is recognised as among the best in Europe. Leakage is down a third since its mid-90s peak.

The £85B of investment over two decades has delivered a lot. Yet there is still work to do. The price limits we have set recently mean that on average, bills will remain broadly stable across England and Wales for the next five years. We've scrutinised every pound to make sure they deliver what customers want - at a fair price.

We're allowing companies to invest more than ever before, £22 billion. Everyone will see real benefits from these proposals - from almost ten million people's water supplies being better protected from events such as flooding, to dealing with the misery of sewer flooding.

On 3 March we launched our refreshed strategy for regulating the water and sewerage sectors over the long term. In delivering sustainable water, we set out our long term approach to regulating water and sewerage.

Sustainable water is about making sure we all have what we need to live today, but also understanding the long term implications of our choices and decisions, leaving opportunities for future generations and using scarce resources in the most efficient and effective way possible. From industrial plant taking water out of a river, to the individual decisions customers make about what to buy from a supermarket, they all have a 'water footprint'.

Our vision of sustainable water is an aspiration for the sector, not just for Ofwat to deliver. Our contribution to this is set out in our strategy and forward programme.

The potential impacts of climate change and shifting populations, in particular, present a whole range of challenges to us all. These could threaten not only the progress we have made, but also our long-term water security.

Our response will need to be different to that of the past 20 years. Our answer to these challenges is to establish our detailed programme of work called 'future regulation'. This is about us actively engaging with our key partners, listening to them, and co-operating to develop solutions that address the new challenges we face. Nnn


Ofwat is carrying out a number of key projects as part of its 'future regulation' programme. These are:

* Future scenarios
Ofwat's future scenarios project is intended to develop a small set of scenarios based on key factors likely to affect the sectors over the long term. These factors include climate change and the environment; population, health and social economics; and UK and global economic conditions.

* Retail market reform
2009's Cave review recommended retail competition should be introduced for non-household water and sewerage customers in England and Wales. This project is designed to establish a marketplace where different water retailers, who buy water and sewerage services at wholesale level, compete to provide water and sewerage retail services.

* Charging and metering
This will address challenges from the Walker review, climate change and affordability, as well as issues like the transition to universal metering, links with smart metering in the energy sector and market reform.

* Sustainable drainage
Intended to help address challenges from the Pitt review and climate change. It will review approaches to governance, stewardship and regulation of drainage infrastructure.

* Accounting separation
To implement formal accounting separation of all the water and sewerage companies in England and Wales. Our objective is for the companies to report their accounts on a consistent basis.
* Regulatory compliance
Reviewing how we monitor compliance by companies. The aim is to develop an effective framework for ensuring the sectors deliver appropriate service standards and other regulatory and legal obligations, whilst minimising the regulatory burden.

* Future price limits
Looking at how we set prices to customers in the future and make best use of water resources, encourage innovation and ensure investment is delivered at the right price.

n Upstream market reform
This project aims to consider the evidence on the benefits of upstream market reform. It will also identify and consider how those benefits may be realised in the most cost effective way.

Further information: www.ofwat.gov.uk/future

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