Following on from its conclusions on developer charges and incentives in October 2021, Ofwat has now published a review of the environmental incentives water companies offer to developers to support more water efficient new homes.

The water sector regulator conducted the review to strengthen their use and effectiveness and to inform how environmental incentives should be regulated from April 2025.

The review examines the environmental incentives that water and wastewater companies offer, both as part of their charges for developer services and more widely, to support better environmental choices. It also looks at a range of other ways that water companies have used the charges they set to influence and incentivise their customers towards environmentally beneficial behaviours.

As part of the review Ofwat has showcased a wide range of methods illustrating how charges can be used to incentivise customers towards particular behaviours.

The regulator said it was ”pleased to see” that this year some companies have worked to launch or improve the environmental incentives they provide, including:

• Thames Water has launched a new innovative discount scheme
• Severn Trent Water’s new environmental discounts are clearly communicated on its web pages
• Affinity Water has worked to ensure that its bulk charges for new appointees are consistent with supporting water efficiency
• Dŵr Cymru’s work on sustainable drainage
• the Enabling Water Smart Communities initiative, led by Anglian Water.

"We need to act now to avoid severe restrictions to water use in the coming years"

Image: Environment Agency, Water stressed areas – final classification 2021

However, Ofwat commented:

“It is also clear from our review that much more can be done, with many companies not offering effective incentives or not appearing to communicate them effectively.”

Introducing the review, Ofwat said that most of England is in serious water stress, with water resources coming under increasing pressure from population growth, economic development and climate change.

“While water shortages are forecast to be most acute in the south and south east of England, severe drought is a widespread risk that needs to be managed. These factors all contribute to a growing sense of urgency that we need to act now to avoid severe restrictions to water use in the coming years", the review says.

Ofwat now plans to engage with industry on both the environmental incentives they can offer over the coming year and on how it will regulate environmental incentives for developer services from April 2025.

Click here to download the review