Water industry regulator Ofwat has today published its forward programme for 2015-16, excluding  routine work, in draft for consultation.

Ofwat’s new strategy,Trust in Water, which builds on its statutory duties and functions, will determine what the regulator will do and how it works from now until the next price review in  2019.

The paper says the new strategy and Ofwat’s work programme for 2015-16 relies on active engagement with stakeholders, including the service providers Ofwat regulates, commenting:

“We are looking to those service providers to step up and take ownership of the need to build and maintain trust and confidence in water and wastewater services. We are looking for them to think seriously about what this means, what they need to do to achieve it, and engage us proactively in a mature dialogue about how we, with them, can help move the sector forward.”

Introducing the document, Ofwat said a number of challenges threaten the services, such as:

• population growth;
• water scarcity;
• climate change;
• higher expectations of tailored services; and
• affordability.

The paper describes Ofwat’s role as the economic regulator for the water sector in England and Wales as helping the water sector to build trust and confidence with customers, the environment and wider society – including provoking, challenging and where appropriate leading the sector. This would ensure it has clarity on what customers and society expect. Ofwat will also stand ready to step in, if service providers fall short.

Ofwat has identified the following areas where it can make the biggest impact for customers now and for the coming years:

"1. Deliver the reforms provided for in the Water Act 2014 and help to ensure that they deliver real benefits for water customers and society. This includes putting in place the arrangements for the opening of the non-household retail market to competition in April 2017, ensuring these customers enjoy benefits from choice and are protected where necessary. This also includes supporting the development of water trading and abstraction reform. Doing these things will require further changes to the way we set prices in our 2019 review. It will also require changes in our approach to casework.

2. Maintain the confidence of investors in the water and wastewater sector and our regulation of it, through this period of change.

3. Develop the means by which we monitor the sector‘s performance against our vision of trust and confidence, and receive assurance from the sector. This information will Inform our decisions on where, when and how we intervene, and may also prompt action by the sector directly. It will include the development of a risk-based approach to assurance, which will reflect the risk associated with different aspects of the sector and different service providers.

4. To ensure that Ofwat has the skills, experience, systems, processes and culture that support our new strategy."

Ofwat will face a "significantly reduced budget" from 2015-16 onwards

The paper also flags up the fact that from 2015-16 onwards, Ofwat will be part of the UK Government’s Comprehensive Spending Review and will have a “significantly reduced” budget. Ofwat said the exact amount it will need from the licence fee to support its work will depend on the shape of the final forward programme. The regulator is proposing a licence fee of £20 million for 2015-16 - about £10 million (33%) lower than 2014-15. This excludes work on Open Water – the programme of work to co-ordinate the development of the market rules, framework and systems required for an effective non-household retail market in 2017. This work is funded by a separate, ring-fenced licence fee from service providers, which is subject to a cap of £10.5 million for 2015-16.

Ofwat will also recover the cost of regulating the Thames Tideway Tunnel project separately from Thames Water. The proposed estimate for this special fee is £1.5 million.

More collaboration with other regulators

Ofwat said the progress it has made on its business transformation during 2014-15 had helped reduce costs and that it will continue to seek efficiencies in delivering its work to secure better value for money. As part of this Ofwat will reduce its office space during 2015-16 and is also looking for opportunities to share resource with other regulators.

This will include seeking further value for money through membership of the UK Regulators Network (UKRN) which Ofwat’s Chief Executive Cathryn Ross will chair in 2015-16. The paper says Ofwat will collaborate actively with the UKRN and others to share learning and best practice in the use of regulatory tools and explore opportunities for joint working where this would improve efficiency and effectiveness.

Possible changes to Ofwat’s work

Commenting on its available resources, the paper says:

“We have an ambitious strategy and a reduced budget. We have made changes to the way we are structured and work to accommodate this, but we still need to be able to work flexibly and re-prioritise throughout the year. While we plan based on previous experience and our understanding of how our landscape will evolve in future, we may need to do more or less than we currently anticipate. This may affect the resources we have available and the work we are able to carry out.”

With regard to its work on Thames Water’s  Tideway Tunnel, Ofwat said this is currently subject to four applications for judicial reviews with work on this programme dependent on:

• ̶the UK Government’s decisions;
• ̶any legal proceedings; and
• the progress of the Thames Tideway Tunnel project itself.

If it goes ahead, the timing of Ofwat’s key dates for the Thames Tideway Tunnel programme will depend on the timing of decisions from the UK Government and the procurement process for an Infrastructure Provider.

The paper also sets out a number of key dates in Ofwat’s forward work programme, including for its work on Water 2020, the programme which will deliver the market arrangements to support the opening of the retail and other upstream markets in 2017 in line with the new legislation. It will also develop a regulatory framework for the 2019 price review. Water 2020 key dates include:

April to June 2015

• Capture the key learning from delivering the 2014 price review
• Publish updated guidance on which customers are considered eligible to choose their retail water and wastewater supplier

July to September

• Design the new retail water and wastewater licensing arrangements
• Consult on the supplier of last resort, new guaranteed service standards and deemed contract arrangements to support the UK Government’s retail exit work
• Consult on and publish Ofwat’s definition of wholesale water and wastewater services
• Consult on charging rules following guidance from the UK Government

January to March 2016

Publish a market assessment that sets out the services over which Ofwat will facilitate competition in the short and medium term, and those which Ofwat will regulate differently at the 2019 price review

New independent resilience group established

The regulator is also planning to work with a new independent group it has established, chaired by Jacob Tompkins, Managing Director of Waterwise, to consider resilience issues. The group will engage with the sector and more widely, to consider the definition of resilience, issues for the sector to consider and issues for Ofwat to consider in its regulation.

The regulator plans to consult on the approach to its resilience duty during April to June, followed by publication of the final approach to its resilience duty at some point between October to December.

On its casework activity, Ofwat said it will use this in the coming months to ensure that the opening of the non-household retail market to competition is effective and delivers benefits for customers as provided for in the Water Act 2014. The regulator  will also carry out work in 2015-16 with a view to ensuring casework will support the development of water trading and abstraction reform, again as envisaged by the Water Act 2014.

The paper says Ofwat will seek to make “robust and timely decisions on individual cases”, with a continued focus on strategic cases, which will bring the most benefit to customers now and over the long term.

Ofwat also intends to deliver a new corporate website that will enable it to communicate with stakeholders in a more dynamic and user-friendly way – target date for implementation is July to September .

Deadline to comment on the consultation is 5 February 2015 – responses will be used to inform the regulator's plans before its final forward programme is published by 31 March 2015.

Responses should be emailed to This e-mail address is being protected from spambots. You need JavaScript enabled to view it or posted to:Forward programme consultation, Corporate Communications, Ofwat, Centre City Tower, 7 Hill Street, Birmingham B5 4UA.

Stakeholders who want to discuss any aspect of the document can also contact Dylan Spedding on 0121 644 7780 or by email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Click here to download the draft forward work programme.