CIWEM believes a wide-reaching review of the governance of the water industry is needed to ensure that our use of water is sustainable in the long term and respects environmental limits. Notwithstanding the successes achieved in the delivery of water and sewerage services in the last two decades, the structure, regulation and management of the water sector needs to be considered afresh if the challenges of the future, from population growth, climate change and environmental management are to be met.
In contrast, the Defra review of Ofwat led by David Gray concluded that regulation in the water sector has worked well since privatisation and that major changes to the statutory and institutional framework are not required. CIWEM was disappointed to learn this after completing its own in-depth review and vision Regulation for a Sustainable Water Industry.
The Ofwat review was asked to consider the extent to which Ofwat has contributed to the achievement of sustainable development. CIWEM has previously called for the duty to contribute to sustainable development to be strengthened by elevating it to the status of a primary but this was rejected.
Within the water industry CIWEM considers that there are incentives that actively reward behaviour and outcomes that are inconsistent with a sustainable water sector. For example, financial regulation features an incentive framework that encourages capital based rather than operational based solutions. This tends to promote ’end-of-pipe’ solutions rather than fundamental design solutions that would promote long term sustainability.
CIWEM welcomes the recommendation that ’Ofwat should seek to ensure that the future framework of incentives provides the right balance between rewards and penalties in the context of the challenges facing the companies, with increased emphasis on incentives for behavioural change’; however we need to progress this quickly.
CIWEM’s vision includes calls for more carbon, water and resource efficiency; more innovation, the frequent reuse of water and the sustainable management of catchments. Relationships in the industry also need to change with more partnership working, more integration and water companies delivering broader water "services" - through a regulatory regime based on long term investment and planning cycles. CIWEM also believes that the true price and value of water needs to be established and for metering to become commonplace.
CIWEM’s Executive Director, Nick Reeves OBE, says:
’Whilst balancing the economic, social and environmental needs of society is presently defined in the parameters for regulation, we believe they need to be adapted to reflect the changed and changing needs of society and the environment - to enhance sustainability and reduce carbon. Many water companies are still able to assume a short term approach and avoid shifting their asset base to sustainable systems and operations whilst ’sheltering’ behind Ofwat’s regulations.
We hope that the review of Ofwat and its findings - for no need for a major change - will not come at the expense of a full and thorough Water White Paper debate.’
