Water industry regulator Ofwat has written to the Secretary of State for Environment, Food & Rural Affairs setting out its views on work it thinks the water companies in England and Wales need to do in finalising their Draft Water Resources Management Plans.

Ofwat’s comments are made in 23 individual letters to the Minister outlining its views on each of the draft plans with specific suggestions about additional activity each company should carry out.

Each water company must prepare and maintain a water resources management plan (WRMP) that shows how it will manage and develop water resources to balance supply and demand for water over the next 25 years. The companies are required to review their plans every year, and prepare and revise them every five years.

As an interested party, the regulator can make representations to the Secretary of State for the Environment, Food and Rural Affairs or Welsh ministers on companies' draft plans. Ofwat has carried out a high-level review of the processes described in each company’s plan against the requirements of the Water Resources Planning Guideline.

More work to clarify role of stakeholder engagement

The role of stakeholder engagement and the Customer Challenge Groups are flagged up for a number of companies – among a range of different issues Ofwat says the companies need to address. Anglian Water is asked to consider further on consulting customers on its proposal to increase the level of service for reservoir-fed customers, together with reflecting the results of its customer willingness to pay (WTP) survey in its final plan.

Bristol Water is similarly asked to do further work on its WTP survey and analysis, while Welsh Water is also told it needs to do more work on providing up-to-date evidence of customers’ willingness to pay for levels of service and explaining the role of the Customer Challenge Group (CCG) in the development of the final plan;

Essex and Suffolk Water and Northumbrian Water have both been told they need to consider further providing further detail of how their customer research on level of service has been carried out, while Portsmouth Water is asked to provide more information on what issues customers and stakeholders were consulted on and what the results of that consultation were.

For South West Water, Ofwat said in general the company needs to be clearer in its plan about its customer engagement, what recent willingness to pay (WTP) studies it has carried out, when its research took place and what areas its customer engagement covered. Veolia Water Projects is taken to task over the need to properly incorporate customer engagement in its plan – Ofwat said it could not find any evidence in the draft plan of how Veolia Water Projects had sought the views of customers in formulating its draft plan nor whether they had been consulted.

In contrast, Wessex Water’s plan was singled out by the regulator as including “evidence of good engagement with customers.”, while the regulator did not identify “any particular concerns in relation to South Staffordshire Water’s draft plan” and welcomed the fact that the company has considered the potential for new water transfers and bulk supplies.

Other concerns where Ofwat is suggesting the water companies need to consider further when in finalising their dWRMPs included:

• Anglian Water to explain clearly the justification for the increases in target headroom and provide more information on the calculation of environmental, social and carbon costs;
• Northumbrian Water to confirm sustainability reductions in the Berwick and Fowberry water resource zone and to provide further information on the demand savings it is forecasting as a result of its metering programme;
• Portsmouth Water to provide further evidence to support its assumption about the number of customers who will opt for a meter;
• Severn Trent Water to explore options from third parties and neighbouring water companies further and to clarify how its Strategic Environmental Assessment (SEA) and Habitats Regulation Assessment (HRA) have informed its choice of options;
• South East Water to ensure that its water transfer schemes are consistent with those in the associated companies’ final plans and to explain what customer support there is for the large increase it is proposing in target headroom;
• Southern Water to justify the changes the company has made to the assumptions that underpin its supply forecast, such as using a 1 in 200 year drought event and to explain why it has not progressed two bulk supply options from Portsmouth Water:
• Sutton and East Surrey Water to explain why its per capita consumption (PCC) is so high compared to other companies (its PCC remains the highest of any water company throughout the planning period),  why the gap with other high PCC companies does not appear to be reducing and why the company’s PCC appears to increase in the late 2030s:
• Thames Water to properly consider water trading options, including with third parties and to clarify how it has taken account of the potential operating cost savings of new sources of water, when compared to existing sources;
• Yorkshire Water to provide evidence of how it sought options from neighbouring water companies or third parties in developing its feasible options list and to explain more clearly why it removed water trading / bulk transfer options between the feasible list and the preferred planning solution.

Ofwat has described its views on the companies’ plans as “without prejudice to any subsequent decisions that we may make in connection with the business plan that the company is scheduled to provide to us later this year as part of the price control review process.” Nonetheless, the comments make for interesting reading in the run-up to AMP6.