Ofwat has flagged up concerns that Affinity Water’s revised draft water resources management plan 2019 does not provide sufficient evidence that it delivers in the best interest of customers on a range of issues.
Writing to the Secretary of State for Environment, Food & Rural Affairs as the regulator's statutory response to the company's recent consultation on the plan, David Black, Senior Director PR19, said:
“While we welcome the improvements set out in the revised draft plan, we are still concerned that the plan does not provide sufficient evidence that it delivers in the best interest of customers in several areas, including:
- regional co-ordination and strategic solution planning;
- consideration of all available options; and
- the validity of some of its planning assumptions.”
Affinity Water published its revised draft water resources management plan 2019 in March 2019 for re-consultation.
David Black said the assessment had considered how adequately the company had addressed Ofwat’s key concerns raised during the original draft water resources management consultation process last year. He also expressed concern about “the significant length of time that it has taken to produce the revised draft plan and commence public consultation.”
Affinity 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. Four zones are forecast to enter a deficit in the early 2020s, driven primarily by abstraction licence changes.
The revised draft plan sets out a range of demand-side and supply-side options it considers are required to meet its future demands for water, and ensure its customers receive a sustainable and resilient service.
The letter acknowledges that some of Ofwat's concerns regarding regional co-ordination and strategic solutions are problems common to a number of companies.
However, David Black referred in particular to the issue of inconsistencies, in terms of timing and magnitude, between Affinity Water’s transfer options and those of its neighbours, commenting:
“This has the potential to significantly impact selection of the optimal regional solution and other companies’ plans.”
The company had identified its preferred regional strategic solution, he said, but did not “clearly evidence its assessment of each alternative option and rationale for its rejection.”
Citing the rejection of a potential River Severn to River Thames transfer as an example, rejection “without compelling justification at an early stage” could have significant impact on neighbouring company plans. In future documentation, Black said Affinity Water should ensure that costs and benefits of regional solutions are presented consistently and transparently.
Ofwat expected the company to work collaboratively with others to fully evaluate feasible options and select “the optimum portfolio that will ensure short, medium and long-term resilience for the south-east.” he added.
The letter welcomes the inclusion of third-party options as part of the overall programme, such as the Grand Union Canal transfer. However, David Black also articulated the regulator’s concern that the revised draft plan had failed to provide sufficient evidence that “all unconstrained supply and demand options have been adequately considered and developed.”
He referred in particular to:
- Affinity Water’s choice to reduce the frequency that it intends to use supplyside drought permits and orders to a 1-in-200 year level of service.
- The company’s decision to reject unconstrained options to reduce outage without providing sufficient justification.
Commenting on metering, the letter says:
“We observe that the company has significantly decreased its metering ambition from over 90% by 2025 in both its 2014 plan and in the original draft 2019 plan, to 79% in the revised draft plan.”
Black also flagged up Ofwat’s concern that the company’s target headroom of 12% is the highest in the industry and “significantly” so in comparison to an average of 8% and has asked Affinity Water to further justify the figure in the final plan.
The letter says that Ofwat's views are "without prejudice to any decisions we may make" during the current price review (PR19) in connection with the business plan that the company initially provided in September 2018 and revised in April 2019.
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