Ofwat Chief Executive David Black has told the National Infrastructure Commission (NIC) that post-privatisation funding allowed by Ofwat for a drinking water quality programme led to improvement in large parts of the water mains network.

The Ofwat Chief was replying to a recent letter from James Heath Chief Executive at the Commission, expressing the NIC’s concerns expressing its concern about the water companies’ present approach to managing ageing underground assets, highlighting a “lack of consistent cross-sector understanding of the rate of likely asset deterioration over time.”

David Black said Ofwat welcomed the focus on water company asset management and that effective asset management was “fundamental if water companies are going to deliver the improvements in performance that we all want to see.”

He went on to explain that:

“Effective asset management requires companies to have the systems, data and processes to understand the condition of their assets, the impacts of climate change and population growth on asset condition and to appropriately invest and manage their maintenance and renewal.

According to the Ofwat Chief, the post-privatisation drinking water quality programme had resulted in an average mains renewal rate of 1.4% per year before 2008 - since the end of the quality programme renewal rates have reduced to 0.5% per year.

“This reflects that over 40% of the network is less than 30 years old and modern pipes can often last over 160 years,” he added, while the data on a range of measures of asset performance - mains repairs and bursts, supply interruptions and leakage – had also been improving steadily over the long term.

However, acknowledging that “asset age is not on its own the best indicator of asset condition” and that asset deterioration can depend on a variety of factors such as company asset management practices, soil type and pipe material, he went on to point that Ofwat is now collecting more disaggregated information on water mains repairs and sewer collapses as part of the 2024 price review.

The letter says the “cohort level information” will provide insights into asset performance by age, pipe material and soil type and help the regulator better understand how assets are likely to perform in the future.

In addition, “there is scope for the sector to learn from best practice in other sectors” and to develop a better understanding of assets, innovate and use digital tools to move to a more predictive approach to asset maintenance.

David Black concludes by saying that Ofwat will be continuing its work on operational resilience and asset management as it goes through the 2024 price review process and beyond, adding he would be “more than happy” to meet with James Heath to discuss Ofwat’s approach further.

Click here to read David's Black letter in full