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Water Resources

Drought Becomes ‘Nationally Significant’ - Persistent hot dry weather, including most recently over the late August bank holiday, has made the water resource situation “nationally significant,” the Government has said .

Yorkshire, Cumbria and Lancashire, Greater Manchester Merseyside and Cheshire, the East Midlands and the West Midlands are in drought. The North East, Lincolnshire and Northamptonshire, East Anglia, Thames, Wessex and Solent and South Downs are experiencing ‘prolonged dry weather’ (the phase before drought). Only five areas are ‘normal’: Hertfordshire, London, Kent, Devon and Cornwall. Reservoirs are 67.7% full across England, compared to an average of 80.5%. Around half of river flows are normal with the rest below normal or worse. 

United Utilities Signs Haweswater DPC Deals - The £3bn Haweswater Aqueduct Resilience Programme (HARP), the first major project to be delivered under Ofwat’s Direct Procurement for Customers (DPC) model, reached a major milestone last week when United Utilities signed up a Competitively Appointed Provider . Cascade Infrastructure, a consortium comprising STRABAG Equitix and GLIL Infrastructure, will manage design, construction, maintenance and financing of HARP.  Arup will provide design services, and Turner & Townsend will act as Independent Technical Adviser.

HARP involves the  replacement of six tunnel sections along the 110km Haweswater Aqueduct – a major pipeline originally built between 1933 and 1955 to transfer drinking water from the Lake District to communities across the North West. Along with securing the water supply for 2.5m people, the scheme will deliver wider economic benefits including 1200 jobs and apprenticeships. The project will move into delivery phase in 2026.

Abingdon Reservoir Costs Double   - The Gate Three submission to the Regulators’ Alliance for Progressing Infrastructure Development (RAPID), published by Thames Water and its partners Southern Water and Affinity Water, showed the cost of building a new mega reservoir at Abingdon is now estimated to be £6.6bn, up from £2.74bn at RAPID Gate Two (2022/23 cost base). This follows a more granular concept design, bottom up cost estimates, realistic quantification of risk and lessons learned from other major projects including the Thames Tideway Tunnel.  

Despite the higher cost, the reservoir remains essential for the south east’s water resilience. Thames said its region needs an extra 1bn litres of water a day by 2050. The Gate Three submission is a milestone in the reservoir’s development to date, effectively marking the end of the feasibility stage and the start of organisational delivery.

Planning

Cost Escalation Derails Cambridge Sewage Works Move - The Ministry of Housing, Communities, and Local Government (MHCLG) has declined to provide funding from the Housing Infrastructure Fund for the relocation of the wastewater treatment works in Cambridge. The plan was to move the works to a greenbelt site, to free up space in the city for 8,500 homes and associated facilities as part of government growth plans. MHCLG cited cost escalation as the reason, thought to be in the region of £400m. Anglian Water said it would now review all options to increase capacity to support growth at the existing treatment works.

Major Projects To Get Lead Environmental Regulator - Major infrastructure developments will benefit from a new ‘lead environmental regulator’ approach, a new oversight body and £500m of support. Government last week said a package of environmental planning reforms would help planning applications be processed faster while ensuring environmental protection, supporting both housebuilding and the 150 major infrastructure projects pledged by the end of this Parliament.

The Lower Thames Crossing will be the first scheme to be progressed under the lead environmental regulator approach, with Natural England coordinating regulatory inputs.

Nationally Significant Infrastructure Projects –  including the Heathrow expansion and the Hinkley Point C power station – will have oversight from a new Defra Group Infrastructure Board (DGIB). Its involvement is designed to identify challenges early and work to resolve them before they cause serious delays. The Government said the reforms would be backed by £500m, which includes funding for the Nature Restoration Fund and the Marine Recovery Fund.

Finance

Government Hires Potential Administrator For Thames - Speculation that Thames Water is headed for special administration increased after reports that the Government has taken on the services of FTI Consulting as a potential administrator. Experts suggested that continuing interest from potential bidders, after KKR’s departure as preferred candidate, make special administration a viable option for a rapid transfer of ownership.

Thames confirmed on 14 August that it had drawn the remaining funds in the first £1.5bn tranche of its super senior debt facility. This secures the company's liquidity needs until at least mid-December.

Customers

Regulator Moots New Rule On Customer Involvement In Decision Making - Ofwat has proposed that water companies be required to meet the core requirement of a new rule, “which is to have appropriate arrangements in place for involving consumers in decisions of the undertaker that are likely to have a material impact on consumer matters”.

It is consulting on how to enact its new power under the  Water (Special Measures) Act to ensure consumer involvement in water governance. ‘Consumers’ are defined as households, businesses and developers. The consultation went on to set out three components tp support the core requirement, and five guiding considerations. Water firms will be subject to the rule from 1 April 2026  and new appointees from 1 April 2027.

Environment

Industry Gets Temporary Part Reprieve On EA Enforcement Cost Levy - The Environment Agency (EA) is to action its plan to make water companies bear the cost of its water prosecutions, civil sanctions, investigations, bringing proceedings and digital enforcement tools – but has said year one (2025-26) will be subject to a 40% reduction in full costs. This reflects the fact that this year will be transitional in terms of the EA moving to a beefed up enforcement regime. These costs have hitherto been funded by government Grant in Aid. Companies will be able to pass the bill through to consumers, at an average 60p per household per year.

25 Year Environment Plan Water Metrics Published - Seven water indicators are to be tracked to measure progress under the 25 Year Environment Plan. These cover: pollution loads, serious pollution incidents, the state of the water environment, the condition of bathing waters, sustainable abstraction, natural functions of ecosystems, and fish populations. The indicators form part of the 25 Year Environment Plan Outcome Indicator Framework , published last week.

Appointments

Governments Appoint Top Civil Servant At Defra And New Directors For NI Regulator - Paul Kissack will take up the post of Defra permanent secretary post from October. He currently leads the Joseph Rowntree Foundation and the Joseph Rowntree Housing Trust. Separately, Northern Ireland’s Department of Finance has appointed Paul McGowan and Anthony Pygram to the Utility Regulator’s board.