Water UK calls for major reform in submission to Independent Water Commission

Water UK is calling for major reform of the water system in its submission to the Independent Water Commission, chaired by Sir Jon Cunliffe.

Its recommendations include sweeping changes to the current system of one-size-fits-all regulation, a fairer deal for customers, a tough new ombudsman to resolve disputes, and a national water grid to move water around the country to balance supply and demand.

Water UK’s recommendations would support economic growth, secure our water supplies and protect the environment.

David Henderson, Water UK Chief Executive, said: “The regulatory system is painfully slow, hugely expensive and ridiculously complicated. In October 2023, water companies submitted plans to help support economic growth, build more homes, secure our water supplies and end sewage entering our rivers and seas, but the investment was only permitted by Ofwat to start this month – over 18 months later.

We’re calling for more direction from the Government on the outcomes it wants from the sector, and for regulation to be reformed so it is simpler, where remits no longer overlap or contradict each other, and decisions are made faster.

We want to see more power devolved from central government and handed to communities so decisions can be taken locally about how best to enhance their local environment, and we want greater consumer protection with a tough new ombudsman and fairer charging for water, which would result in lower bills for the vast majority of customers.

The full submission can be accessed here.

1. Reform water bills by introducing mandatory smart metering and allowing new tariffs that abolish standing charges and shift costs away from the majority of households towards very high users of water such as those with swimming pools and second homes. This would potentially result in lower charges for low volume users.
2. Government should establish a powerful new consumer ombudsman to protect customers, one that has powers to enforce judgements once a company's complaints process has been exhausted, as is the case in the energy, communications and rail sectors.
3. Water billpayers shouldn’t have to pick up the cost of pollution from other sectors. A ‘polluter pays’ principle should be enforced that requires industries like pharmaceuticals and insecticide producers to make a ‘fair share’ contribution for the costs they add to water and wastewater processes, instead of putting additional costs on water billpayers.
4. Powers should be devolved away from Whitehall and handed to communities, so decisions can be taken by customers about how best to protect and enhance their local environment, bringing water companies together with other land users such as farmers to deliver the most effective local improvements.
5. We need the introduction of legally-binding resilience standards, ensuring that networks are upgraded to be resilient to climate change and extreme weather, and heavily reduce the length and severity of service failures and emergency incidents.  
6. Regulators should be given sharpened responsibilities and clearer duties - allowing each to focus on what it does best. This includes removing unnecessary duplication by ending Ofwat’s role in setting environmental targets, and further empowering the Environment Agency and Natural Resources Wales.  
7. We need to boost regulatory capability and accountability by funding regulators to pay sufficiently high and flexible salaries to attract and retain the most skilled people.  The National Audit Office should be asked to support Parliament’s oversight function by conducting a review of the effectiveness of Ofwat’s decisions.
8. New supervisory teams empowered to intervene when a water company’s financial resilience is at risk, including by requiring minimum equity buffers and recapitalisation plans. The best performers should be able to achieve greater autonomy and earn higher returns based on delivering excellent service.
9. Introduce simpler performance regulation with a ‘supervisory’ approach that places expert teams within a regulator and empowers them to really understand each business and what it requires in the long-term interests of customers. This would allow a reduction in the regulatory burden that Ofwat currently imposes and build trust between regulators and water companies.
10. A new vision for water in a White Paper, delivered within twelve months of the Commission reporting, that sets clear, long-term outcomes for water companies, regulators, government departments, other public bodies and – crucially - other sectors all to work towards.
11. Create a new pipeline and separate treatment of ‘enhancement’ programmes, so that major projects can be approved and delivered far more quickly, to boost economic growth.  
12. A century after we started building a national electricity grid, we need a National Water Grid for England to move water around the country to where it is most needed to balance supply and demand.