Ofwat has raised a number of concerns over West Country Water Resources (WCWR) draft regional plan which was published in February 2023.

Writing to Iain McGuffog Chair of WCWR on 2^nd May, Aileen Armstrong, Senior Director has set out its assessment of the draft plan, saying the comments provided in the letter are “without prejudice” to the following:

• any subsequent statutory consultation responses Ofwat may make on the relevant company Water Resources Management Plan
• decisions that Ofwat make regarding business plans at PR24 and any subsequent price review.

The letter says the scale of water needs has grown significantly from previous planning rounds, driven by long term changes to abstraction under the environmental destination scenarios included in the water resources national framework, agreed sustainability reductions and the impact of time limited licence capping.

“Despite our previous feedback, and the predicted increased water needs, most regional groups have chosen 2039-40 as the regulatory target for achieving 1 in 500 year level of drought resilience without sufficient testing or explanation,” Aileen Armstrong states.

Ofwat expects the water companies, working as part of regional groups, to reduce demand for water to relieve pressures on water supply and increase resilience to extreme drought and to use the regional plans to adhere to demand targets including:

• halving leakage across the industry by 2050, in comparison to 2017/18 levels;
• reducing personal consumption to 110 litres per head per day (l/h/d) by 2050.

The letter raises a number of concerns about the WCWR plan, pointing out that Ofwat had made representations on the emerging plan highlighting that significant work was needed to move from a high-level strategy to a best value single preferred adaptive regional plan that can inform individual WRMPs. “Despite this, the draft plan shows only modest progress since the emerging plan”, the letter states.

Aileen Armstrong has asked that WCWR should set out, in its statement of response, what improvements are possible for the final plan. In addition, it should also explain how the next iteration of the plan will “bring about a step change and provide sufficient and convincing evidence” to inform the strategic decisions that are coming, such as the potential development of the Mendip Quarries option.

Acknowledging that there has been some progress in areas such as customer and stakeholder engagement and work on pilot catchments, according to Armstrong Ofwat still has the following outstanding concerns relating to the draft plan which need to be addressed before the plan is finalised:

• Addressing previous feedback – WCWR has not taken on board some important points raised through Ofwat’s previous consultation responses.
• Technical evidence – WCWR has provided limited written technical evidence to support its draft plan.
• Drought resilience – WCWR has provided some evidence around how it has explored the tradeoffs it faces through customer and stakeholder feedback. However, no evidence of sensitivity testing around the year in which the plan aims to meet the 1 in 500 year drought resilience has been presented and there is no commentary on levels of service.
• Abstraction – given the scale of potential changes, WCWR needs to demonstrate that its final plan can manage this uncertainty without abortive investment and should plan investigations to find the best value options to adapt to future uncertainty.
• Options sufficiency – the plan is not clear which options have been considered and is inconsistent with the supporting data tables. It does not provide sufficient and convincing evidence that additional options have been included since the emerging plan stage and therefore the concerns we raised previously about options sufficiency remain. WCWR should improve on this for its final plan and for the longer term, noting that an increased range of options could have implications for scaling, timing or selection of large infrastructure projects. WCWR should make sure the final plan is consistent with any supporting data.
• Best value – WCWR should provide more clarity on what its best value analysis means for the final plan, how sensitive decisions are to the assumptions made, and how cross-sector best value metrics are treated in associated WRMPs.
• Adaptive planning – WCWR has not presented a single plan with one preferred adaptive solution and set of options with suggested branch point dates. This should be presented in the final plan.
• Ambition – WCWR has not detailed how it will achieve its demand management targets despite our feedback on the emerging plan stressing the importance of providing extra detail in this area to give confidence on delivery.
• Data tables – Ofwat is concerned about the level of detail and accuracy applied to the regional data tables and whether the options described in the tables have been considered in the plan. The tables had missing, incomplete, and resubmitted data which has led to some difficulties in Ofwat’s assessment. WCWR should provide robust and clear supporting evidence for its data tables.
• Cheddar Two – Ofwat is concerned that the Cheddar Two solution is not selected in the preferred plan in the regional planning tables, or the company preferred plans despite being in the Regulators Alliance for Progressing Infrastructure Development (RAPID) gated programme. If there is a strong needs case, Ofwat expects the final regional plan to set this out with sufficient and convincing evidence of need.

The letter raises particular concerns about Cheddar 2 in the context of .Strategic Resource Options (SROs). The WCWR plan considers three SRO supply schemes, Mendip Quarries, Poole effluent recycling and Cheddar Two which provide a total gain of 75.5 Ml/d for the dry year annual average in 2050. However, the WCWR data table shows that Cheddar Two is not selected in the preferred plan, Ofwat core pathway or least cost plans. Wessex Water and Bristol Water are co-sponsors of the Cheddar Two reservoir solution in the Regulators Alliance for Progressing Infrastructure Development (RAPID) gated process.

The letter says:

“We are concerned that the solution is not selected in the preferred plan in the regional planning tables, or the company preferred plans. Despite the draft WRMPs not including any evidence of need, the RAPID programme is being asked to consider the recommendation to progress Cheddar Two beyond the current RAPID gate two development stage. This would result in customers continuing to fund the development of a scheme that is not needed according to the latest published evidence. If there is a strong needs case, we expect the final regional plan to provide sufficient and convincing evidence of this.”

Aileen Armstrong also points out that Ofwat has concerns in relation to WCWR’s decision making and prioritisation that require further focus before the final plan is published and is calling for WCWR to present the outcome of its problem characterisation to justify its choice of decision-making approach. “The best value decision-making approach remains basic since the emerging plan” and “falls short of what Ofwat would expect given the planning challenge faced.”

In addition, Ofwat would like to see carbon emissions in the final best value plan clearly presented alongside a clear discussion of the trade-offs made between whole life carbon emissions and other considerations to agree the final best value plan.

Commenting on cost information, the letter says that in terms of whole life unit costs, for both operational and capital expenditure, WCWR companies are selecting options that have higher unit costs than the average across the industry. In Ofwat;’s view there are a range of lower cost feasible options available and WCWR should explain in its final plan why high-cost options have been selected in their place.

The regulator wants WCWR to provide “sufficient and convincing evidence” to demonstrate that the preferred programme represents low regrets best value investment over the long term and to clarify how bill impacts have been considered as part of the final regional plan.

With regard to leakage and water efficiency, where WCWR is proposing to get to 110 litres per person per day by 2050 with the aim of halving leakage by 2050 from a 2017-18 baseline, the letter says it has not yet developed “a plausible or costed route to achieving this” which is required and should be included in the final plan.

WCWR should also set out in its final plan how it will align with the government target to reduce the use of public water supply in England per head of population by 20% from the 2019 to 2020 baseline reporting figures, by 31 March 2038, with interim targets of 9% by 31 March 2027 and 14% by 31 March 2032, and to reduce leakage by 20% by 31 March 2027 and 30% by 31 March 2032.

Aileen Armstrong concludes her letter by saying:

“Once you have had a chance to consider these comments in detail, we would like to hear how you plan to address them and note that we have a session scheduled to do so later this month. “

Click here to read the letter in full