Ofwat has flagged up the need to take account in the upcoming 2019 Price Review of the dual risks that some companies may not be adequately considering resilience, whilst others may be proposing a gold plated level of resilience and driving inefficient expenditure.
The warning comesin the Minutes of the Ofwat Board meeting held on 23 February 2017 when the Board considered a paper on the approach to resilience which focused on both Ofwat’s role and the risks/opportunities the water sector is facing.
It noted potential cost pressures in the next review period due to an increased focus on resilience and that the development of water and bioresource markets would also provide opportunities to further resilience.
Reviewing a paper on the evaluation of water resource management plans (WRMPs), the Board also noted that the WRMP process is an important tool for identifying and planning resilient long term water resources. The WRMPs are also a key input to the activities for which companies will seek funding under the price control which would be captured within company business plans.
In the Board’s view the water companies should be able to identify a portfolio of options for addressing supply-demand imbalances including supplies from water companies (water trading), leakage reduction and demand management solutions to develop the most cost effective approach. It was also important that, as part of this exercise, companies with surplus should understand how they can help address issues for other company areas.
The central themes of customer service, resilience, affordability and innovation are expected to be “the golden thread” running throughout the forthcoming Price Review in 2019 (PR19) methodology consultation which is due to be published in July 2017, according to the minutes. The consultation will also set PR19 in the context of the journey to the subsequent 2024 Price Review.
The Minutes also refer to the opportunities for “a step change in efficiency” due to the move to a totex and outcomes approach. The meeting also flagged up Government initiatives that may have an impact on regulation in the sector, include the Green Paper on Critical National Infrastructure and the draft Strategic Policy Statement setting out the government’s strategic priorities for Ofwat’s regulation of the water sector in England, consultation on which closed this week.
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