Water industry regulator Ofwat has launched a new consultation inviting views on how it should take forward its primary duty to further the resilience objective it gained through the Water Act 2014.

Ofwat said the consultation is focussed on:

• creating the right regulatory framework to enable, incentivise and encourage water companies to put resilience at the heart of their business planning
• resilient services and systems; not just pipes and networks but also corporate systems and ecosystems

Ofwat’s working definition of resilience is as follows.

“Resilience is the ability to cope with, and recover from, disruption, trends and variability in order to maintain services for people and protect the natural environment, now and in the future.”

Ofwat said it would not be appropriate for it to mandate a single approach to resilience. The regulator will not be setting sector-wide targets and it will also not set standards, which it said would turn resilience into a ‘compliance’ issue.

Ofwat has set out the following resilience principles for the sector in the consultation document:

Principle 1 – a clear understanding of risk to services.

Principle 2 – action based on analysis of the risks.

Principle 3 – service providers ensuring resilience.

Principle 4 – customer views at the heart.

Principle 5 – resilience at the heart of the business.

Principle 6 – resilience as efficiency. The paper points out that increased resilience does not have to lead to higher bills. However, it states: “ Increased resilience for the future may mean additional investment now, and service providers will need to have this conversation with their customers. Developing an integrated, more flexible network can represent more efficient investment. The trade-offs between current and future customers’ services and bills will need to be discussed with customers. “

Principle 7 – partnership. Service providers cannot deliver resilience in isolation. The paper says lots of players have a role in making sure that resilience is built into planning and delivery of water and wastewater services, including local authorities and business partners. It also says that partnership working offers the greatest opportunity to deliver innovative solutions and move away from ‘pouring concrete’ approaches.

Principle 8 – the sector reporting transparently on its progress.

Principle 9 – a whole-life, ‘total costs’ approach.

Principle 10 – approaches delivering multiple benefits. The paper says many of the principles set out above will deliver multiple benefits to customers, the environment and society – and that service providers should consider sharing the risk, costs and benefits with partners.

Key questions Ofwat is seeking to address are:

Q1 Is our basic understanding of resilience aligned with your own – are we addressing the right things in the right way?

Q2 Do you agree with our view of what Ofwat should deliver, including where we might step in, and what is for others to deliver?

Q3 What views do you have on how the water and wastewater sector might measure its performance in delivering resilient services – and the best way for us to demonstrate that we are carrying out our role?

On the issue of how Ofwat will know if it is “getting it right”, the regulator plans to build resilience into its assessment framework. The consultation is inviting views on indicators of resilience and leading indicators of resilience-related risk that could be included in the framework.Ofwat is also asking whether it should seek independent reports, which service providers would need to fund, from time to time on company-specific or cross-cutting sector resilience issues, and on what criteria might be used to trigger such reports.

More work to do to make services and systems resilient

Cathryn Ross, Chief Executive said:

“Delivering resilient services to customers is important if companies are to build and maintain trust and confidence in this vital public service sector.

“The sector has made good progress but there is more work to do to make services and systems resilient - including ecosystems and financial and corporate systems. We need to ensure our framework informs, enables and incentivises service providers to make the best decisions for their customers now and in the future, while using resources sustainably. This will require creative thinking and excellent understanding and management of risk – ensuring that resilience is at the heart of what they do, not an add-on.”

Ofwat is planning to publish its final approach to its resilience duty towards the end of 2015.

Deadline for responses to the consultation is 28 August 2015 – click here to access the consultation document.