Policy And Regulation Updates

Regulation

Ofwat CEO Calls On Companies And Supply Chain To Prepare For A Workload Increase At PR24 - Ofwat chief executive David Black has provided a check list for water companies hoping to make the case for bill increases to fund a step-up in investment at PR24 amidst a cost of living crisis and falling public trust.

Speaking at British Water’s Spring Reception, Black identified the following requirements:

• Focus on what matters to customers and communities, not arcane debates about cost of capital. “Customer expectations will continue to change so companies need to understand and anticipate what customers expect regarding service, resilience and the environment.”
• Demonstrate that expenditure is value for money and communicate how it will benefit local communities. 
• Ensure business plans are deliverable. “With a large step up in investment, this will be much more challenging than before – especially as we consider the volume of other major infrastructure investment elsewhere in HS2, nuclear, renewables and the grid. It is vital that companies anticipate the challenge, work closely in partnership with supply chain and innovate to meet the challenge.”
• Prioritise affordability. “Customers’ real incomes are falling and it is vital that companies understand the pressures on customers and think carefully about long-term impacts, phased investment approaches, and adaptive planning.” Moreover: “Companies have considerable experience with social tariffs, so it will be important to learn from this experience in the design and delivery of social tariffs as an increasing number of customers struggle to pay their bills.”
• Ensure financial resilience – “We welcome the steps taken by a number of companies to raise further equity; it is clear with the scale of investment required that other companies would require new equity in coming years. Companies should anticipate and address these issues.”

Black called on supply chain companies to prepare for a higher level of activity, including a “significant increase in the number of major projects at PR24 such as large reservoirs, major transfers and water recycling schemes;” a large scale roll out of smart meters/smart networks; and a step up in nature-based solutions and sustainable drainage schemes.

Planning

Reservoirs In England Recover As Drought Sweeps Europe And Scotland Warns Of Scarcity - According to the latest update from the multi-stakeholder National Drought Group (NDG) chaired by the Environment Agency, reservoir capacity across England hit 94% at the start of April. However two areas – East Anglia and Devon and Cornwall – remain in drought. The NDG is scoping out the worst case scenario of another hot, dry summer and discussing proactive measures to take.

Meanwhile in Scotland, the Scottish Environment Protection Agency (SEPA) warned businesses that abstract water directly to plan for possible shortages this summer. Parts of western, central and northern Scotland have reached the ‘early warning’ stage for water scarcity, according to SEPA’s first 2023 water scarcity report.

Parts of Europe including areas of France, Spain and Italy are struggling with ongoing drought conditions. In the southern French region of Pyrénées-Orientales, the sale of garden pools will be banned from tomorrow as well as car-washing, garden-watering and pool-filling as the area enters ‘crisis’ level drought. According to reports, around 2,000 conurbations risk losing their water supply.

Storm Overflows

Storm Spill Reduction Targets To Be Enshrined In Law - The targets detailed in Defra’s £56bn Storm Overflow Discharge Reduction Plan are to be enshrined in law.

Environment secretary Therese Coffey made a statement to that effect to Parliament the day the Government succeeded in wrecking Labour’s bid to pass an Opposition Day Motion that would have allowed Labour to bring its Water Quality (Sewage Discharge) Bill to the House.

Labour’s Water Quality (Sewage Discharge) Bill sought among the following provisions:

• Bring in the monitoring of water quality potentially affected by sewage discharges by 1 October  2023.
• A 90% reduction in sewage discharges from a 2021 baseline by 31 December 2030.
• Automatic financial penalties for water companies for sewage discharges from storm overflows and sewage works, and for failure to comply with monitoring requirements – with the necessary enforcement power for the regulator. 
• A strategy from the secretary of state to deliver the 90% reduction by 1 October 2023 that features water companies meeting the cost without charge increases for customers or reduced investment in sewerage infrastructure. 
• Consultation with Welsh ministers about the impact of the the Act in Wales, with a view to the application to Wales of the Act’s provisions.
Conservative MPs said the Bill was impractical and unnecessary, as the spill situation is already being dealt with. 

Committee Calls For Urgent Plan To Address Sewage Discharges In Wales - The Welsh Affairs Committee has called on the Welsh Government to act with greater urgency in tackling sewage discharges.

In a letter from chair Stephen Crabb MP to climate change minister Julie James, Crabb said the Committee’s top concerns were: 

• The accuracy of monitoring equipment, and therefore reliability of data. 
• The lack of monitoring of the volume of sewage discharged as well as the frequency of outflows. 
• The frequency of “unpermitted” sewage discharges from storm overflows. 
• The low number of prosecutions in Wales to enforce water quality regulations and the apparent 
lack of appetite from regulators for stronger enforcement powers and sanctions. 
• The apparent lack of urgency in tackling these challenges on the part of regulators and water companies. 
The Committee has been taking evidence in its Water Quality in Wales inquiry. Crabb requested a reply by 15 May.

Resilience

NIC And CCC Call For Climate Resilience Action For Infrastructure - The National Infrastructure Commission (NIC) and Climate Change Committee (CCC) have written jointly to the environment secretary and deputy prime minister urging them to overhaul the resilience of key infrastructure services to the effects of climate change.

The advisory bodies set out five steps to accelerate national adaptation planning to protect key networks:

• Setting clear and measurable goals for resilience, and action plans to deliver them.
• Ensuring standards are developed in time to inform forthcoming regulatory price control periods.
• Giving explicit duties for resilience to all infrastructure regulators. Ofgem, Ofcom and the ORR should have a resilience duty akin to Ofwat’s, and all should be given a duty to support the delivery of net zero.
• Cabinet-level oversight of interdependencies and whole-system resilience.
• Embedding resilience in infrastructure planning as we move to an economy more reliant on electricity. 

Pollution

Two Water Firms Receive Largest Ever Regional Green Fines - Two water companies have received the biggest court fines ever imposed for environmental offences in their respective regions, following Environment Agency prosecutions. 

Anglian Water pleaded guilty and was fined £2.65 million after allowing untreated sewage to overflow from its Jaywick Water Recycling Centre in Essex into the North Sea. 

South West Water was fined £2.1 million for a series of environmental offences across Devon and Cornwall spanning a period of four years.