Ofwat has published its Annual Report for 2007-08. According to the Report, despite the credit crunch during the later part of 2007-08. water companies have where necessary been able to continue to raise finance and remain financially robust unlike other sectors.

Ofwat states that its continued task of holding companies to account for the delivery of services to customers has resulted in significant improvements in leakage control and ongoing improvement in environmental quality. The Report also refers to what Philip Fletche, Chairman of Ofwat, calls “ a serious blemish on the performance of several companies “, namely the misreporting of information, whether through poor systems, inappropriate corporate cultures, or in two cases deliberate misreporting. Mr. Fletcher  said

“The prime lesson is that company Boards should take full responsibility for the overall quality of systems and processes that deliver services to customers and underpin the statistical returns made to Ofwat.”

Regina Finn, Chief Executive of Ofwat, commented that Ofwat had effectively tackled many new and unplanned challenges while still delivering its committed work programme. Introducing the Report, Ms. Finn highlighted Ofwat’s development of  guidance for companies to assess the robustness of their infrastructure to extreme events in the light of last year’s floods and implementation of the first phase of the 2009 price review process among key tasks for Ofwat during the course of the year.

Ms. Finn also said that Ofwat’s methodology for setting price limits incorporated fresh thinking and new mechanisms for making sure that each company delivers the high-quality services its consumers expect – particularly in the face of the potential for further extreme events, like droughts or floods, because of climate change. Ofwat believes that new methodologies, like using the shadow price of carbon in making investment decisions, will also encourage companies to consider further long-term challenges (such as mitigating climate change) in the way they deliver services to consumers.

With regard to competition, Ms. Finn said

“Ultimately, the intervention of a regulator is no substitute for the rigours of competitive markets. “ The competition review published by Ofwat in May 2008 is intended to provide Ofwat with “a direction of travel” for developing competition in the water and sewerage sectors in the years to come. The regulator is seeking to introduce competition progressively wherever it benefits consumers.