Summary of the final report for the water industry
https://www.gov.uk/government/publications/independent-water-commission-review-of-the-water-sector
Summary
This report is the final recommendations of the Independent Water Commission following a comprehensive review of the water sector across England and Wales. It identifies systemic challenges and proposes a strategic, legislative, regulatory, and operational overhaul aimed at restoring public trust, enhancing environmental outcomes, and ensuring long-term resilience. The report is structured around seven reform themes and a final implementation chapter, with 88 detailed recommendations targeting government, regulators, and water companies.
Key Take Aways
- A new long-term, cross-sectoral National Water Strategy is recommended for both England and Wales to provide strategic clarity, coherence, and direction.
- Creation of regional water authorities to foster local engagement and accountability in water planning and investment decisions.
- Integration of water regulators in England (Ofwat, DWI, EA, Natural England) into a single regulator; Wales to embed economic regulation within NRW or establish a new economic regulator.
- Fundamental overhaul of economic regulation, introducing a company-specific supervisory model alongside existing benchmarking mechanisms.
- Major revisions proposed to the Price Review process to prioritise asset maintenance and reduce investor risk.
- Mandatory national social tariffs to support low-income households and creation of a single water ombudsman for customer redress.
- Legislation to be updated to address public health and environmental concerns, with enhanced powers for regulators.
- Clear statutory resilience standards for infrastructure to ensure long-term system and asset integrity.
- Significant improvements to governance and transparency in water companies, including new senior executive accountability regimes and powers to block investor control changes.
- Stronger incentives and frameworks for innovation, including regulatory sandboxes and new funding models.
- Wales-specific recommendations include alignment with the Well-being of Future Generations Act, agricultural pollution management, and resilience investment planning.
Innovation
- Introduction of regulatory sandboxes to trial innovative approaches in water management without full regulatory exposure.
- Shift from industry-wide benchmarking to tailored company supervision to improve regulatory oversight and reflect local circumstances.
- Recommendation to consolidate nine existing business plans into two integrated frameworks (‘Water Environment’ and ‘Water Supply’) for simplicity and coherence.
- Proposal for a clear government-led prioritisation framework to guide regulators in navigating trade-offs between affordability, environmental goals, and investment needs.
Key Statistics
- Over 50,000 responses received to the Call for Evidence.
- Agriculture is responsible for 62% of phosphorus loading in Welsh SAC rivers; storm overflows account for 28%.
- The water sector is projected to require an additional 5 billion litres/day by 2055 due to population growth and policy demands.
- The Water Industry National Environment Programme (WINEP) budget rose from £5.7 billion to £23.9 billion (2022–2023 prices) in the 2024 Price Review.
- In Wales, 95% of the water supply comes from surface water; only 5% from groundwater.
- Dŵr Cymru (Welsh Water) operates under a not-for-dividend model, contrasting with private company structures in England.
Key Recommendations for Customers in Arrears and Vulnerable Customers:
1. Introduction of a Single, Mandatory Social Tariff
- Proposes a national social tariff scheme to provide consistent, fair support for low-income households who struggle to pay their bills.
- Aims to replace the current patchwork of company-specific schemes with a unified approach across England and Wales.
2. Creation of a Mandatory Water Ombudsman
- Recommends upgrading the complaints framework by creating a statutory ombudsman for the water sector.
- This would ensure clear, independent redress for customers, including those with unresolved arrears or service issues.
3. Enhanced Customer Experience Metrics
- Recommends the introduction of a new customer experience metric for the regulator to better hold companies accountable for service to vulnerable and indebted customers.
- Designed to incentivise improvements in treatment, complaint handling, and overall care for those most at risk.
4. Stronger Role for Citizens Advice
- Suggests transferring the consumer advocacy role from CCW to Citizens Advice, enabling a more coordinated approach to advice and support for financially vulnerable customers.
5. Supervisory Regulatory Model
- A new regulatory supervision model would place increased emphasis on how companies serve vulnerable and indebted customers, not just financial or environmental metrics.
- This model would enable tailored regulatory oversight and ensure companies are proactively supporting at-risk consumers.
6. Affordability Safeguards within Price Reviews
- The revised price review framework would require water companies to demonstrate how they are addressing affordability and reducing the burden on low-income and vulnerable customers.
- Reinforces the principle that bill increases must be justified by clear service improvements and support mechanisms.
7. Protection During Service Disruption
- Resilience standards and infrastructure recommendations explicitly include a focus on ensuring that vulnerable customers are not disproportionately impacted by supply interruptions, emergencies, or asset failures.
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