Policy And Regulation Updates

Election Campaign

Parties Set Out High Level Views On Water Regulation, Ownership And Reform - Ofwat The five main political parties have covered water issues in their general election manifestos, though in varying degrees of detail and prominence. They key water pledges are summarised below.

The Labour manifesto, Change, reiterated the widely-trailed pledge to put water companies into ‘special measures’. There was no detailed definition of what exactly this would entail, beyond giving new powers to regulators to block water bosses’ bonuses for pollution; introducing criminal charges for persistent law-breaking; and automatic fines for ‘wrongdoing’. The party also championed independent monitoring of storm overflows.

The Conservative manifesto said the party would continue with its current Plan for Water, but with some new additions. These included a bonus ban for bosses whose companies are found guilty of serious criminal breaches; the creation of a new River Recovery Network funded by water company fines; and moving to catchment-based, outcome-focused regulation. There was also a pledge to continue providing a £50 water rebate for South West Water customers.

The Liberal Democrat manifesto, For a fair deal, contained the most detailed plans for water, and gave them prominence. It intends to replace Ofwat with a new regulator, the Clean Water Authority, with beefed up powers including to revoke the licences of poorly performing water firms, ban bonuses for water bosses until leaks and discharges end, and to accelerate legally binding targets on sewage discharges. The party also plans to: transform water companies into ‘public benefit companies’ with reformed governance structures including representation of local environmental groups on company boards; introduce a ‘Sewage Tax’ on water company profits; and improve water quality monitoring. It would further introduce a single social tariff in the next Parliament to address water poverty; create a new  ‘blue corridor’ programme for rivers, streams and lakes and set new ‘blue flag’ standards; and implement Schedule 3 of the Flood and Water Management Act to require sustainable drainage systems in new developments.

The Green Party pledged to bring water back into public ownership. Reform UK also saw benefit it public ownership; it said it would create a new ownership model for critical national infrastructure, to bring 50% of each utility into public hands, with the other 50% owned by UK pension funds. Its manifesto also sought to build reservoirs, stop sewage spills and scrap all net zero related objectives.

Meanwhile, a poll undertaken for The Wildlife Trusts found most people think all main parties are doing badly on tackling the nature and climate crises. 78% said all parties are doing poorly on river pollution, 71% said the same of nature loss, 69% of climate change, and 65% of ensuring communities can benefit from nature.

Green coalition Wildlife and Countryside Link (WCL) has written to all political party leaders, saying that the next Government will be in breach of the law if it does not halt the decline of nature by 2030. Ahead of the announcement of a general election, WCL sent a pre-action protocol letter, which obliges Government to explain how it thinks it is fulfilling its legal obligations under the Environment Act: to halt the decline of wildlife by 2030, and meet further targets on water quality, biodiversity, air pollution, and waste reduction for 2042.

Responsibility for meeting the targets will now transfer to the next administration. WCL said it will consider issuing a claim for judicial review in the High Court, if it does not get a satisfactory response. WCL is also hosting a hustings today [17 June] to quiz the environmental representatives of the five largest parties. This can be watched on YouTube on 18 June – details here.

PR24

Ofwat To Aim For December Final Determinations, But May Delay Until January  - Ofwat has published an updated timetable for its 2024 price determination (PR24), after the general election necessitated a delay due to purdah rules. 

The regulator said it would endeavour to issue final determinations on 19 December, but that it was exploring the option of extending this until 31 January at the latest. This is due to a very compressed schedule, following the election delay.

In the meantime, it will issue draft determinations on 11 July and run a seven-week consultation until 28 August. It set out details for how water companies can engage with it during this time, including plans for topic specific webinars and one-hour meetings for each company.

Business customers along with other customers and stakeholders are invited to give Ofwat feedback on its draft decisions via two online meetings, called ‘Your Water, Your Say.’ The meeting for England will be at 2-4pm on 23 July and for Wales at 2-4pm on 24 July. 

Ofwat told companies to use a pro forma for their formal representations; representation meetings will begin after 28 August.

Water Resources

SESRO Strategic Reservoir Consultation Begins - Thames Water is consulting on plans for SESRO (South East Strategic Reservoir Option) – a major new strategic reservoir in Oxfordshire. The proposals have been developed in conjunction with Southern Water and Affinity Water, as the reservoir is designed to secure future water supplies for all three company’s customers, a projected 15 million people.  

Stakeholders have until 28 August to respond. The consultation will be supported by a series of community events in Oxfordshire, and online resources.

Thames intends to submit a Development Consent Order (DCO) seeking permission to construct and maintain the new reservoir in 2026.

Mergers & Acquisitions

SES Water Becomes Part Of The Pennon Group - Competition watchdog the Competition and Markets Authority (CMA) has cleared Pennon Group’s acquisition of SES Water, which supplies water to customers in Sutton and East Surrey. 

The Pennon Group now serves over 4m customers and includes South West Water (including Bournemouth Water), Bristol Water, SES Water and two business retailers – Pennon Water Services and Water2Business

The CMA formally accepted Pennon’s ‘undertakings’ in lieu of a longer merger inquiry. 

The undertakings included sharing 50% of merger-specific cost efficiencies with customers and providing separate cost and performance information to Ofwat to enable separate price controls to be maintained. 

Pollution

Welsh Water Pleads Guilty To Wye Permit Breach - Ofwat Welsh Water has been fined £90,000 for exceeding permitted levels of sewage effluent released into the River Wye from its Kingstone and Madley sewage treatment works. The incidents took place on three occasions in 2020-21. 

The company pleaded guilty to an environmental permit breach prosecuted by the Environment Agency. It was ordered to pay costs of £14,085.05.