Water Regulation

OfwatOfwat (the Water Services Regulation Authority) is the independent economic regulator for the water and sewerage sectors in England and Wales.

Ofwat’s regulation of the water companies over the past two decades has delivered that:
  • Bills are more than a third lower than they would have been without Ofwat.
  • Leakage down by 35% since its peak in the mid 1990s.
  • Compliance with environmental standards is much higher than pre privatisation.
  • Water quality has improved.
At privatisation, polluted beaches and rivers, together with a neglected infrastructure meant we were seen as the ‘dirty man of Europe’. In 1998, only around 80% of England’s bathing waters met the required standards. Now we have fish in the Thames, 82 Blue Flag beaches (compared with 12 when the scheme was launched in 1987) and world-class drinking water.

These improvements are the result of the substantial investment programme that the companies have carried out. By 2010, they will have invested £80 billion in maintaining and improving assets and services. All of this has been delivered at no expense to taxpayers.

Against this background, we have set challenging efficiency targets for the companies. This is how we have kept bills as low as possible. At only 94p a day on average, water bills for most customers are significantly lower than their energy bills. And a litre of tap water, supplied and taken away, costs less than half a penny.

We have made sure that the companies have not abused their positions as regional monopoly suppliers. Our comparisons on levels of service, for example, have provided incentives for the companies to rise to the highest industry standards. Where companies have fallen short, we have held them publicly accountable and taken action against them. Using our enforcement powers, we have, for instance, imposed penalties of almost £75 million on errant companies.

While we shall continue our direct economic regulation, we will explore the role of market competition and consider where and how best this should be used. At the moment, a company such as Tesco can choose its suppliers for everything, except water. We think that all of the 160,000 commercial organisations in England and Wales should have the right to challenge the companies to offer the best price and services.

Market competition will also bring innovation in water efficiency and developing water resources. This will be particularly vital in regions where water is becoming increasingly scarce.

We also want the companies to develop their understanding of the true cost of water at each stage of delivering services to consumers. This will encourage them to apply their costs clearly and consistently. It will also help customers to understand what they are paying for.

In the years to come, we shall use all means available to us to make sure that customers get a fair deal and value from their water companies.

To find out more about Ofwat visit www.ofwat.gov.uk