Overhaul regulatory roles, says water firm
Severn Trent is calling for an immediate overhaul of Ofwat and the EA's regulatory roles that make long-term planning difficult.
In a report, Changing course – a sustainable future, published mid-way through the election campaign, the company said the industry was no longer sustainable in its present form with too many companies all too dependent on debt financing.
“We’re not alone in this [view],” said Tony Wray, chief executive of Severn Trent. “Some of us believe that there are more effective ways of running this industry… We’re very clear that 22 companies means that we’re getting sub-optimal solutions,” he said.
The company criticised the existing “risk-averse” regulations, saying it favours “capital intensive” rather than sustainable solutions. It also wants an immediate government review of the current price-setting processes, and the UK’s proposals for implementing the EU Water Framework Directive.
The industry needs to invest £96B over the next 20 years, on top of its existing £33B debt, in order to make improvements to infrastructure and adapt to climate change risks.
“Whilst historically the industry has been able to make operational efficiencies to limit the impact of improvement programmes on bill, to continue to deliver efficiencies we will need to improve our processes through much greater innovation,” the report said.
Severn Trent said its proposals would save the industry more than £10B during the next 20 years and reduce
carbon emissions by 13%, compared to the current business-as-usual scenario. “By passing on these efficiencies to customers, average bills could be 11% lower than they would have been otherwise,” the report added.
The report’s timing meant that Ofwat was unable to respond directly as it is in “purdah” during the run-up to the general election. However, an Ofwat spokesman said the regulator was already addressing many of the concerns raised in Severn Trent’s report, and the next government would determine the future shape of water industry regulations.