Ofwat has agreed that the proposed Havant Thicket Reservoir solution should continue to receive development funding to progress to gate four of the RAPID process – despite significant concerns raised by a wide range of stakeholders following the water sector regulator’s draft decision published on 12 November 2024.

The HWTWRP is a RAPID Strategic Resource Option that, once operational, would be capable of providing up to 90 million litres of water a day. Solution owners Southern Water and Portsmouth Water submitted their gate three reports on 31 July 2024 for assessment.

The deadline for solution owners and other interested parties to submit comments on Ofwat’s draft decision closed on 17 January 2025 – Ofwat considered all representations before publishing its final decision on 21 February.

Ofwat comments in the detailed 53 page final decision document:

“We have taken all relevant representations into account in making our final decision. At the time of publishing we are aware that Southern Water have asked for their 2024 price review final determinations to be referred to the Competition and Markets Authority (CMA) for a redetermination.”

The HWTWRP would take some of the treated wastewater from the existing Budds Farm Wastewater Treatment Works in Havant. This water would be purified at a new water recycling plant before being pumped into the Havant Thicket Reservoir, which is now being constructed. Here it would mix with spring water feeding into the reservoir.

A new 40 kilometre pipeline would then take water from the Havant Thicket Reservoir to Southern Water's Otterbourne Water Supply Works where it would be treated to drinking water standards before being sent into supply.

Stakeholders who responded to the consultation included Portsmouth Water and Southern Water themselves, members of the public, MPs, local councils and environmental groups.

Concerns included:

• rising costs of solution and concerns over whether it continues to represent best value
• lack of engagement with stakeholders, including local councillors and customers
• lack of understanding of environmental impacts
• concerns over potential pollution risk to Langstone Harbour
• insufficient justification of need for water recycling and insufficient consideration of alternative solutions
• risks arising from poor management by Southern Water amid concerns about the water company’s current performance and operational failures

Commenting on confidence in Southern Water, Ofwat says in the final decision document:

“We acknowledge that Southern Water's performance on a range of issues has led many customers and stakeholders to lack confidence in their ability to deliver this solution. We expect Southern Water to engage extensively with these customers and stakeholder groups to help build confidence within the community.“

The water sector regulator is allowing expenditure of up to £25.25 million for progressing the solution towards gate four in the period to end March 2025. Additional funding for completing gate four in the period 1 April 2025 to 31 March 2030 determined in the Price Review 2024 process is £19.82 million.

The decision paper says Ofwat considered whether Southern Water and Portsmouth Water had presented a programme with key milestones and whether its delivery is on track. Ofwat’s assessment also considered the quality of the information provided on risks and issues to solution progression, the procurement and planning route strategy, and subsequent gate activities with outcomes, penalty assessment criteria and incentives.

Ofwat states:

“We consider the evidence provided by Southern Water and Portsmouth Water regarding the programme and planning, risks and issues and the procurement and planning route strategy for this solution to be of satisfactory quality, however it lacked detail in some important areas …

Southern Water and Portsmouth Water provided very limited information in regard to procurement. The details provided focused on the procurement plan and strategy and the summary of changes due to Havant Thicket Reservoir. The initial heads of terms included only limited and very high level commercial topics….

"Southern Water and Portsmouth Water provided enough detail about their operational ready dates, key activities and decisions, estimates of overall project delivery timescales for subsequent gates, and key dependencies.”

Next steps

The decision paper sets out a range of actions now expects Southern Water and Portsmouth Water to take on gate four activities and timing, including a number of priority actions which must be completed by 31 March 2025. They are also required to provide a table outlining outstanding issues which need resolution in order to agree heads of terms for the Bulk Supply Agreement (BSA).

The paper states:

“We are not satisfied with progress on the BSA. To incentivise the companies to resolve the issues regarding the agreement of a BSA we need to monitor the situation in case we need to intervene and exercise our power to impose a BSA.”

Gate four timing

Southern Water and Portsmouth Water have proposed a date for gate four of September 2025, alongside:

• a Development Consent Order planning application submission date of July 2025
• a construction ready date of December 2028
• an operational ready date of March 2034

Ofwat has accepted the forward programme on the basis that it is in line with the principles of RAPID's programme.

“Provided Southern Water and Portsmouth Water complete these priority actions and actions within the agreed timeframes, we are comfortable with the progression of the solution and still hold that it should continue into gate four,” Ofwat says.

Click here to download Ofwat’s paper Gate three final decision for Hampshire Water Transfer and Water Recycling Project February 2025 in full