Ofwat has expressed its concerns over aspects of Thames Water revised draft water resources management plan for 2019 published by Thames Water in October 2018 for re-consultation.

In a letter to the Secretary of State at the Department for Environment Food and Rural Affairs (Defra), David Black, Ofwat’s Senior Director PR19, outlining its assessment, said Ofwat's views were without prejudice to any subsequent decisions it might make in the PR19 price review in connection with the water company’s AMP7 draft business plan .

The letter says the assessment has considered the following areas:

• how adequately the revised draft plan follows the requirements of the water resources planning guideline and Defra’s guiding principles for water resources planning;
• how the revised draft plan helps achieve Ofwat’s vision of ensuring trust and confidence in the sector through the delivery of the key themes for PR19 of great customer service, affordable bills, resilience in the round and innovation;
• how the company has addressed Ofwat’s key concerns raised during the original draft water resources management consultation process earlier in the year.

Ofwat expects all water companies to adopt a ‘twin track’ approach to improve water supply resilience through both increased supply and reduced demand in their long term water resources planning.

David Black told Defra that Thames Water is predicting that many of its water resource zones would be in deficit in the future, without additional action to reduce demand or provide additional supplies. The revised draft plan sets out a range of demand-side and supply-side options. The London zone is forecast to enter a deficit in the early 2020s and is at risk to severe drought events.

David Black said Thames Water has responded to many of the concerns Ofwat had raised with its original draft plan, including improving its level of ambition in relation to leakage reduction per capita consumption levels and water trading.

However, he told Defra the revised draft plan did not provide evidence that it delivers in the best interest of customers in some key areas and still did not provide sufficient evidence the proposed supply-side options are appropriate.

“Based on the multiple changes since the original draft plan, and the updated needs of the south east region, there needs to be confidence the proposed supply-options are low regret and the timing of their delivery is appropriate.“

“The company should also justify the early surplus generated by option delivery and how the proposed changes to the demand management programme have impacted upon the supply option selection.”

He goes on to say there appears to be a supply-demand surplus early in the planning period which could be considered for short and medium-term trading opportunities with neighbouring companies before any strategic regional solutions are developed.

The letter also suggests that low risk drought orders identified in the latest company drought plan with the potential to provide approximately 40Ml/d in drought conditions could be included within the WRMP plan options which could support local and regional supply-demand balances.

In addition, Ofwat also considers there is scope to further optimise regional resilience, although the letter acknowledges the revised WRMP company plans in the south east have demonstrated evidence of further regional co-ordination.

David Black said:

“We understand this is not an issue for Thames Water alone and we expect it to continue to work with other companies to develop truly regional solutions to address challenges in the south east. We expect Thames Water to work collaboratively with others to select the optimum portfolio that will ensure short, medium and long-term resilience for the south east.”