Defra, Ofwat, the DWI and the Environment Agency are calling for greater collaboration between the the water companies, together with working with other sectors, to build resilient water supplies.

The regulators want the utilities to find joint short and long-term solutions which strengthen the resilence of the UK’s water resources and also improve the environment.

The call in a joint letter comes just over a year since the regulators first wrote to the water companies outlining five key areas where additional effort was needed to make the country’s water resources more resilient.

The latest letter reiterates the objectives and takes stock on collective leadership and progress since August 2018. The regulators say that in the intervening period the issues and opportunities represented by adapting to climate change have been prominent in the news, government policy and public consciousness.

Commenting on each area individually, the letter says:

1. Increased ambition in company business plans for the 2020 to 2025 AMP7 investment period

According to the regulators, work to date has reinforced that collective ambition can only be achieved through good joint working and collaboration. The expectation is for water companies to continue to evolve the plans in real time and adapt and change to meet the challenges faced year on year, instead of waiting for each 5 year cycle of WRMP and Business Plans.

2. Regional water resource planning that transcends company boundaries and identifies optimum solutions for the region and the nation as a whole.

Led by the Environment Agency, a National Framework is being developed that will articulate the national need for water to at least 2045 and set the challenge for each region to select and deliver the best solutions for the region and nation.

Five regional groups of water users have now been established, covering the entire geography of England and an important interface with Wales through the west group. According to the regulators, there are opportunities for multiple benefits by working in a collaborative way across the water sector, between different water users and with those planning industrial growth. However, the letter says “we currently only observe this happening in pockets and we want to see more.“

This will in turn unlock a wider range of opportunities and “a different menu of viable options" - particularly important as the country faces the possibility of another dry winter causing difficulties for agriculture and the environment in 2020.

Referring to the recent incident in Whaley Bridge where collapse of a reservoir dam wall was narrowly avoided, the letter describes as “a pertinent reminder of the diversity of resilience risks you need to manage” and points out that the water companies are expected to” effectively manage all hazards associated with your industry.” The regulators are also looking for more delivery on the demand side by helping customers to become water efficient.

3. Greater use of markets and competition to ensure that solutions are delivered efficiently

The regulators have welcomed the take-up of the Direct Procurement for Customers mechanism for some water resources schemes in PR19 and want to see more ideas such as Water Resources North’s proposal to offer a number of options as a region in surplus to regions in deficit.

Competition can reduce the cost of developing new resources and help deliver strategic and innovative solutions, the letter says, commenting:

“The Regulators’ Alliance for Progressing Infrastructure Development (RAPID) and the National Framework will be looking to explore more opportunities to achieve the benefits of competition.”

It points out that that Ofwat are investigating new market options and issued a call for information in June to explore the potential for the development and implementation of a bilateral market in water resources in England.

4. Clear, joined up direction from government and regulators

Commenting on the importance of having a regulatory approach that provides clear direction to support the development of plans and investment scenarios, the letter sets a range of areas where significant progress has been made:

• Ofwat has secured £2.93m of funding from Treasury to set up RAPID. RAPID will work with the water companies to provide a one stop shop to help overcome the barriers which currently hamper the development of strategic schemes. However, the regulators say they recognise that “developing and delivering strategic schemes introduces dependencies and risks.” Working through the RAPID team the regulators will provide “a seamless regulatory interface” and overcome barriers enabling the schemes to become ready for construction.
• Ofwat has made £450m funding available through PR19 to develop new supply options and explore the feasibility of new schemes.
• Defra has consulted on and agreed to take forward new primary legislation to provide a Secretary of State power to direct companies to plan together and with other sectors on regional planning.
• Following its consultation on measures to reduce personal water consumption which closed in October 2019, Defra is hoping to publish a summary of responses early in the new year.
• The independently chaired National Framework is developing a cross-sectoral approach to defining future water resource needs and has gathered evidence on supply and demand forecasts. It will publish a report in December which will provide the water companies with “the direction and bounded scenarios required to plan with confidence.” The quality and compatibility of WRMPs submitted will be expected to improve significantly as a result of this improved evidence base and direction, the letter says.
• The Environment Agency will be working with government and regulators to produce a ‘destination statement’ for resilient water resources. It will signal the further enhancements wanted for water users and the environment. It will build on the collaborative approach taken by the National Framework.
• Defra has consulted on the draft National Policy Statement for water resources infrastructure which will streamline the planning process for large schemes.

5. A responsive regulatory approach to deal with issues as they arise

Looking ahead, the regulators say they will continue to respond to barriers as they arise by “changing water resources planning and approaches to funding that support and encourage continuous improvement”

We look forward to continuing, maintaining and extending this approach to deliver the secure, safe, environmentally beneficial and cost effective water resources that consumers expect.

Commenting in the letter, Sally Randall Director, Floods & Water at Defra, Rachel Fletcher Chief Executive of Ofwat, Chief Inspector of the Drinking Water Inspectorate Marcus Rink and Harvey Bradshaw, Executive Director of Environment and Business at the Environment Agency say:

“It is imperative that you look beyond company boundaries and work with other sectors to deliver resilience for the nation as a whole. The new regional plans will be crucial in delivering this new future.”

“Your continued engagement with the National Framework and commitment to the regional groups is vital so that the regional plans align to achieve a coherent national picture.”

“We want to see more examples of companies working with other sectors to find joint short and long-term solutions which also improve the environment.”

The letter concludes:

“Together we have achieved a step change in the last twelve months” but “there is more to do.”