Policy paper

February 2022: The government’s strategic priorities for Ofwat

Updated 28 March 2022

Presented to Parliament pursuant to section 2A of the Water Industry Act 1991.

Government’s strategic priorities for Ofwat

This statement sets out our strategic priorities for Ofwat, the independent economic regulator of the water industry. This statement complements Ofwat’s existing duties, which are summarised in Appendix 1.

Protecting and enhancing our nation’s water environment is a priority for this government. We have been clear that we want the water industry to play its part in achieving this. It is government’s expectation that Ofwat and the water industry will prioritise appropriate action to enhance water quality and deliver a resilient and sustainable water supply. In particular, government wants to see water and sewerage companies making progressive reductions in the adverse impacts of discharges from storm overflows.

Our strategic priorities for Ofwat are:

• protect and enhance the environment: Working with other regulators and government, Ofwat should challenge water companies to improve their day-to-day environmental performance to enhance the quality of the water environment. Ofwat should also drive water companies to be more ambitious in taking action to protect and enhance the environment, in particular by taking appropriate action to improve water quality
• deliver a resilient water sector: Ofwat should challenge the water industry to plan, invest in, and operate its water and wastewater services to secure the needs of current and future customers, in a way which delivers value to customers, the environment and wider society over the long-term
• serve and protect customers: Ofwat should push water companies to provide a better and fairer water service for all, by improving customer services and complaints handling. Ofwat should challenge water companies to meet the needs of vulnerable customers, including those who are ‘transiently’ vulnerable
• use markets to deliver for customers: Where appropriate, Ofwat should consider how promoting competition in markets can drive long-term sustainable investment, providing benefits to customers and supporting government’s priorities. Ofwat should focus its efforts on the business retail market, the NAV market, ecosystem services, developer connections, major infrastructure provision, and bioresources

The government has committed to taking a long-term approach to investment, recognising that a system that works in the enduring interests of consumers does not simply mean lower prices in the short-term at the expense of future generations. Ofwat should promote efficient investment, ensuring it is made in a way that secures long-term resilience and protects and enhances the environment, whilst delivering value for money for customers, society and the environment over the long-term.

As the industry works towards these shared goals, it will be vital that support is in place for those who may struggle to afford water bills.

In this statement, we describe what we expect of the water industry. Ofwat should have regard to these expectations in carrying out its relevant functions, except where a more explicit steer is provided about the role we expect Ofwat to play. In doing so, we expect Ofwat to:

• set out how activity across its forward work programme will deliver against the government’s strategic priorities
• explain clearly how major decisions support delivery of our strategic priorities, for example, when establishing the methodology for price reviews or publishing draft and final determinations
• report on progress to its Board and through its annual report and accounts
• have an effective framework to hold companies to account within its statutory remit

The legislative framework

The independent economic regulation of the water industry is essential to protect customers, facilitate efficient investment and enable growth. To support this, the government needs to set out a clear strategic context in which Ofwat, customers, water companies and investors can take informed decisions.

Under section 2A of the Water Industry Act 1991 (as amended by the Water Act 2014) the Secretary of State may from time to time publish a statement setting out strategic priorities and objectives for Ofwat to follow in carrying out its relevant functions relating wholly or mainly to England.

Ofwat must carry out those functions in accordance with any statement published under section 2A. When formulating the statement, the Secretary of State must have regard to Ofwat’s duties under section 2 of the Water Industry Act 1991, social and environmental matters, and may have regard to such other matters they think fit.

The Secretary of State is required to consult Ofwat, the Consumer Council for Water, relevant undertakers, licensees, the Environment Agency, Welsh Ministers, Natural Resources Wales and anyone else the Secretary of State thinks appropriate, on a draft of the statement. Prior to final publication, a draft of the statement must be laid before Parliament for a period of 40 days.

Protecting and enhancing the environment

Water industry improvements have delivered significant environmental benefits and has contributed to the water environment being in a better condition than it was 30 years ago. In recent years, however, improvement to the overall quality of the water environment has stalled. Climate change and biodiversity loss, as well as population growth and emerging chemical contaminants are further intensifying pressure on the water environment.

The government’s 25 Year Environment Plan sets out our strategy to achieve clean and plentiful water by improving at least three quarters of our waters to be close to their natural state as soon as is practicable.

Water companies play a key role in protecting and enhancing the environment. To improve the quality of our water environment, water companies must reduce pollution from sewage and wastewater.

The public and government expect the environment to be at the heart of water company decision-making. Companies need to prioritise actions to reduce pollution and considerably improve their environmental performance, while delivering long-term value for money.

Getting the basics right

Priority: Working with other regulators and government, Ofwat should challenge water companies to improve their day-to-day environmental performance to enhance the quality of the water environment.

The water industry’s environmental performance has stagnated and, in certain cases, deteriorated in recent years. Poor environmental performance is not acceptable and poorly performing companies need to rapidly improve. All companies must comply with permits and regulation, and we expect companies to have processes in place to achieve this.

We want to see far less reliance on storm overflows which discharge sewage into our water courses. The Environment Act 2021 places clear duties on water and sewerage companies to progressively reduce the adverse impacts of discharges from storm overflows and improve transparency of reporting when discharges occur.

We therefore expect water companies to significantly reduce the frequency and volume of sewage discharges from storm overflows, so they operate infrequently, and only in cases of unusually heavy rainfall. We expect overflows that do the most harm or impact on the most sensitive and highest amenity sites to be prioritised first. The outcomes we expect water companies to meet on storm overflows will be set out in the Storm Overflows Discharge Reduction Plan. Water companies should set out how they will improve the performance of their drainage system, including reducing discharges, through drainage and wastewater management plans. We also expect companies to be open and transparent with the public and provide information relating to discharges to the environment and their environmental impact as soon as reasonably practicable.

Expectations of water companies’ overall environmental performance, both statutory and non-statutory, will also be set out elsewhere by government, the Environment Agency and Natural England. For example, in the water industry strategic environmental requirements (WISER).

We expect Ofwat to:

• challenge water companies to demonstrate how they will improve environmental performance to meet Environment Agency requirements in the Environmental Performance Assessment
• challenge water companies to demonstrate how they will achieve zero serious pollution incidents by 2030
• challenge water companies to demonstrate how they will significantly reduce the frequency and volume of sewage discharges from storm overflows, so they operate infrequently, and only in cases of unusually heavy rainfall

Environmental ambition

Priority: Ofwat should drive water companies to be more ambitious in their actions to protect and enhance the environment, in particular by taking appropriate action to improve water quality.

In addition to getting the basics right, water companies have an important role in protecting and enhancing the environment to achieve improved water quality and wider environmental outcomes, targets and objectives.

We expect water companies to meet the requirements of all environmental legislation. Water companies should, when supported by customers and where it represents good value for money, also exceed these legislative requirements and deliver wider environmental benefits in the course of carrying out their functions.

Water companies and regulators need to be outcome focused, innovative, integrate actions across the catchment and work in partnership with other organisations. The impact of environmental efficient investment by the water industry should be maximised through co-funding with other sectors and green finance opportunities, where appropriate, including through market mechanisms. We expect companies to support environmental protection, increased flood resilience and enhancement of priority habitats such as chalk streams.

Environmental pressures, particularly from nutrients (phosphates and nitrates) and others such as unsustainable abstraction, are significant contributing factors to the decline of some of our protected sites (protected sites’ is used here to refer to Sites of Special Scientific Interest (SSSI), Special Areas of Conservation (SAC), Special Protection Areas (SPA) and other locations designated as protected due to the presence of valuable natural features), severely impacting rare and significant habitats of national importance. Ofwat and water companies should consider these environmental pressures in line with their environmental duties and where appropriate, work with wider stakeholders to support efforts to tackle them. If water companies fail to play their part, Ofwat should consider where it is appropriate to use the regulatory framework to support such efforts.

Nature and catchment-based solutions in the water sector have an important role to play in helping to meet our target to raise at least £500m a year in private finance for nature’s recovery by 2027 and more than £1 billion by 2030. Water companies should significantly increase their use of nature and catchment-based solutions to achieve multiple benefits for the environment and the public. We expect companies and regulators to work towards delivering these solutions as a matter of preference; so long as risks are understood, controlled, and proportionate to the potential benefits. Lessons should be learned from taking these approaches and learning disseminated across the sector.

We welcome the commitment by water companies to achieve net zero operational carbon emissions by 2030. Water companies should also have regard for the policies and proposals set out in the Net Zero Strategy, which shows how all parts of our economy can contribute to our national target of net zero greenhouse gas emissions by 2050. Ofwat will have an important role in scrutinising and challenging companies’ business plans.

We expect Ofwat to:

• challenge companies to deliver against both relevant environmental legislation, and applicable targets set under the Environment Act 2021, and how they will meet the ambition set out in the WISER
• require water companies to demonstrate in their business plans how they will meet the ambition and expectations set out by government and in the WISER
• encourage companies, when supported by their customers, to deliver wider environmental benefits in the course of carrying out their functions
• encourage companies to operate in partnerships across catchments maximising co-funding and green finance opportunities, wherever appropriate, including through market mechanisms
• support an increase in the use of nature-based solutions where appropriate and in the interests of the environment and customers. Ofwat should work with the sector, the Environment Agency, Natural England and others to rapidly identify and overcome any barriers to the uptake of these approaches by water companies
• challenge water companies to prioritise improvements to protected sites and recognise the importance of priority habitats such as chalk streams, including the need to address nutrient pollution
• challenge water companies to contribute to meeting the objectives in the River Basin Management Plans

A resilient water sector

Priority: Ofwat should challenge the water industry to plan, invest in, and operate its water and wastewater services to secure the needs of current and future customers, in a way which delivers value to customers, the environment and wider society over the long-term.

Customers and government expect a resilient, sustainable and wholesome water supply and resilient wastewater services. The resilience of the sector is becoming ever more important with increasing pressure from climate change and population growth.

The government expects the industry to plan, invest and operate to meet the needs of current and future customers. The industry should do so in a way which delivers value to customers, the environment and wider society over the long-term. This will require water companies to shift towards long-term adaptive planning. Water companies must rigorously assess and improve their resilience, including existing assets’ health, to a full range of hazards.

Ofwat should promote an integrated water management approach so that water company actions deliver best value for customers and achieve multiple benefits where possible. To achieve this, regulatory frameworks should be further developed to enable cross-sector working.

Safe, clean drinking water is vital for public health and the wellbeing of our society. The government supports action by industry to trial approaches to reducing exposure of lead to customers from drinking water, from a public health perspective.

The sharing of data, information and ideas is critical for ensuring the industry and wider stakeholders work together to improve resilience. A failure to share data openly and transparently can undermine the resilience of the water industry. Government expects the industry to keep pace with the wider digital economy, and to demonstrate measurable progress in improving transparency and data sharing with relevant stakeholders.

Meeting long-term water resources needs

To meet our water resources needs over the long-term, and in a sustainable way, water companies must take a twin track approach of increasing water supplies and reducing demand for water.

In line with the Environment Agency’s National Framework for water resources water companies should take a collaborative, cross-industry, regional planning approach to increase water supply.

We expect Ofwat to:

• support and challenge regional groups and water companies to effectively plan and deliver solutions to meet the long-term challenge to water supply set out in the National Framework, including the need to be resilient to a one in 500-year drought, with the aim to meet this by 2040
• recognise the need for investment in supply and demand solutions as set out in the water resources management plans (WRMPs)
• challenge the water companies to meet that need in a way that provides wider benefits, (such as flood resilience, and social and environmental improvements) whilst representing the best value for money over the long-term
• push the industry to innovate and adapt to deliver the expectations in the National Framework, including drawing lessons from collaborative approaches developed by Regulator’s Alliance for Progressing Infrastructure Development (RAPID)
• encourage and incentivise action to address unsustainable abstraction that harms the environment

Managing water demand

Reducing demand for water can relieve pressures on water supply and increase our resilience to extreme drought. Water companies must act to reduce demand for water in a way that represents value for money in the long-term.

We expect Ofwat to:

• challenge water companies to halve leakage across the industry by 2050. Water companies have committed to delivering a 50% reduction in leakage from 2017 to 2018 levels by 2050. We expect Ofwat to monitor progress towards this target
• support and encourage water companies to develop a consistent approach to address leakage on customers’ own pipes. This could include provision for identifying leaks, agreeing who is responsible for repairs and replacement, and monitoring the impacts of this
• hold companies to account for their contribution towards reducing personal water consumption to 110 litres of water per head per day (l/h/d) by 2050
• work with the water retailers, incumbent water companies and other stakeholders to support and contribute to the delivery of the Industry Action Plan to improve the water efficiency of businesses, in a way that is consistent with its duties

Ofwat should account for any relevant statutory targets when assessing water efficiency measures in water companies’ business plans, and monitoring water company performance.

Delivering resilient drainage and wastewater services

Strategic planning for drainage and wastewater services is essential to manage increasing challenges from population growth and climate change. The industry must achieve this while meeting the needs of both current and future customers, and in a way that delivers value to customers, the environment and wider society over the long-term.

It is crucial that water and sewerage companies have a detailed understanding of their network capacities, potential challenges and risks, and ensure their systems are fit for purpose and more resilient – both now and into the future. To achieve this, water and sewerage companies will produce drainage and wastewater management plans (DWMPs). Through DWMPs water and sewerage companies will be expected to improve resilience, reduce pollution incidents, reduce the risk of flooding in people’s homes and improve the local environment.

We expect Ofwat to:

• take into account the aims of the drainage and wastewater planning process, in the “Framework for the production of Drainage and Wastewater Management Plans”, including the government / regulators’ joint guiding principles to companies (currently being finalised and will be formally issued in early 2022)
• encourage and support the water industry to collaborate with others in the implementation and future development of DWMPs and encourage the increased use of catchment-wide, nature-based solutions and sustainable drainage schemes, where appropriate
• challenge and incentivise companies to meet the aims of strategic drainage and wastewater management planning in a way that represents best value for money over the long-term for customers, the environment and wider society

Greater resilience to flooding

All sources of flooding impact water companies, their customers and local communities, disrupting services and damaging property and the environment. Climate change and population growth are increasing this risk and associated impacts, and the whole sector has a role to play in boosting long-term flood resilience.

Action is already underway, but there is more that the industry can do to help deliver greater long-term flood resilience. We expect the industry to deliver this need in a way that achieves value for money over the long-term, considering wider costs and benefits to customers, the environment and wider society. We expect water companies to carry out meaningful and effective engagement with their customers to better understand their support.

We expect Ofwat to:

• challenge water companies to deliver greater flood resilience for their own infrastructure and services, and where appropriate provide wider benefits to their customers and the wider community
• challenge and incentivise the water companies to identify and deliver greater customer, societal and environmental benefits from their water and wastewater infrastructure and systems, such as using reservoirs to provide greater flood resilience. This should include leveraging funding from third parties where appropriate
• challenge and encourage water companies to work in partnership with others to support and, where appropriate invest in flood resilience measures that secure wider benefits for them, their customers and the wider community
• challenge the water companies to regularly review and fully understand the current and long-term flood risk to and from their infrastructure and systems and identify opportunities to increase resilience

Asset health

Good asset management is a key factor in delivering long-term resilience. We expect companies to demonstrate a clear understanding of the health of their assets over the long-term and how this impacts the resilience of their services. Effective management of assets will support future resilience of service and provide benefits to the environment and society through, for example, reduced environmental harm and fewer flooding and pollution incidents.

We expect Ofwat to:

Promote good asset management and challenge companies to better understand the health of their assets and adopt a strategic and long-term approach. This approach should provide for resilient services taking account of growing pressures, including climate change and population growth, and the needs of a healthy environment, and provide value to customers and wider society in the longer-term.

Security, corporate and financial resilience

Security and emergency measures

As well as being prepared for emergencies such as floods and droughts, water companies need to ensure they are protected against a wide range of security threats. This includes theft, cyber-attacks or terrorism. The Security and Emergency Measures Direction (SEMD) requires water companies to develop and maintain plans to ensure a water supply at all times, including during a civil emergency or event threatening national security.

The government is currently concluding a review of SEMD and the associated policy framework. A set of new security and emergency planning outcomes which companies will be expected to meet, together with new supporting guidance, will provide clarity on the future framework for companies in good time for PR24 planning. To support companies in the delivery of the SEMD outcomes Ofwat should continue to ensure that its regulatory approach, including the price review process, promotes the efficient delivery of companies’ obligations. As part of the review of SEMD we have also improved existing assurance and reporting structures, including linking SEMD performance reporting with potential PR24 business plan proposals. Ofwat should use information supplied by Defra and the Drinking Water Inspectorate (DWI) from this process to inform PR24 decisions.

Under the Network and Information Systems (NIS) Regulations 2018, water companies must take appropriate measures to manage risks to their network and information systems and prevent and/or minimise the impact of incidents to those systems.

Corporate and financial resilience

Ofwat has incorporated objectives on board leadership, transparency and governance into water company licences. As water companies provide an essential public service to their communities, we expect Ofwat to encourage and incentivise water companies to meet these objectives and to foster better corporate responsibility.

The water sector continues to attract investment reflecting the status of the water companies as public utilities. We expect Ofwat to provide the regulatory conditions to foster a culture which gives proper consideration to the long-term and balances the interests of current and future customers fairly.

Serving and protecting customers

Priority: Ofwat should push water companies to provide a better and fairer water service for all, by improving customer services and complaints handling. Ofwat should challenge water companies to meet the needs of vulnerable customers, including those who are ‘transiently’ vulnerable.

Ofwat definition of vulnerability: a customer who due to personal characteristics, their overall life situation or due to broader market and economic factors, is not having reasonable opportunity to access and receive an inclusive service which may have a detrimental impact on their health, wellbeing or finances.

This strategic policy statement sets out an ambition for water companies to deliver more for the environment and increase resilience. Ofwat’s price determinations should secure a fair deal for all customers now and in the future, providing intergenerational value and improved services, and should challenge companies to meet the needs of vulnerable customers, including the ‘transiently’ vulnerable.

Some customers may experience transient vulnerability, where the circumstances leading to them being vulnerable is short-term and any need for assistance is temporary. For example, people leaving hospital treatment.

Ofwat must consider the affordability of bills for the generality of customers, as well as requiring that water companies have protections in place to support households who struggle with their water bills.

Water companies must understand the needs of their customers through better engagement and the use of data when developing their longer-term outcomes and priorities. Business plans should reflect evidence of customers’ expectations, and the affordability and acceptability of future bills.

Water companies should proactively manage customer debt, by raising awareness of the support available to households, and effectively target support offerings before customers fall behind on their payments. This will not only improve outcomes for customers who fall into debt, but also for companies’ whole customer base, as any increase in the number of customers who cannot afford their bill puts pressure on wider customer bills.

We expect Ofwat to:

• challenge water companies to treat all customers fairly and to continue to strengthen focus on protecting vulnerable customers
• encourage water companies to implement the recommendations of the Consumer Council for Water’s (CCW) Affordability Review to improve awareness of, access to and fairness of support measures in the industry
• challenge water companies to deliver on their commitments to expand data sharing initiatives across the industry and with other utilities
• challenge water companies to proactively manage customer debt
• encourage water companies to engage meaningfully with their customers and reflect robust evidence of customers’ expectations, and the affordability and acceptability of current and future bills in company business plans

Effective and timely services for all

Water companies must provide excellent services, including customer service and complaints handling. Household customers are unable to switch water company provider, so it is even more important that when things go wrong they are quickly put right; and that customers can rely on a fast and effective complaints process.

We expect Ofwat to:

• incentivise water companies to continually improve their customer service and improve the timeliness and quality of responses to household and non-household customer complaints, including those raised by retailers on behalf of their business customers
• work with CCW to monitor the effectiveness of the customer complaints handling process and, where necessary, consider the case for improvements to the process

Protecting small business customers

The business retail market opened in 2017 to enable eligible businesses, charities and public sector organisations in England to switch from their local monopoly water company to another supplier of retail services. Larger, higher consumption customers have tended to engage in the market more than smaller customers and therefore have seen the greatest benefit from the market opening in terms of money, water and time saved.

We expect Ofwat to:

• protect the interests of micro and small business customers that are not engaged in the water retail market using competition and/or regulation as appropriate
• improve the value available to all customers from the business retail market by promoting greater collaboration between market participants

Using markets to deliver for customers

Priority: Where appropriate, Ofwat should consider how promoting competition in markets can drive long-term sustainable investment, providing benefits to customers and supporting government’s priorities. Ofwat should focus its efforts on the business retail market, the NAV market, ecosystem services, developer connections, major infrastructure provision, and bioresources.

Markets for eco-system services

There is growing interest in the development of appropriate market mechanisms to support investment in natural assets and their management. These solutions can deliver multiple benefits such as improved flood resilience, with the potential to attract co-funding. We want Ofwat to enable and encourage the increasing use of these nature-based solutions.

Business retail market

The business retail market opened in 2017 to enable non-household customers including businesses, charities and the public sector to have a choice over their water and wastewater retail services. An effective market should deliver better service and more responsive products, saving customers money, water and time.

As part of Ofwat’s duty to further the consumer objective, there is a need to explore whether changes to market rules, processes, and structures can deliver better outcomes for customers, society and the environment.

However, the regulatory framework alone will not deliver improvements to the market. All parties, including water companies, retailers, other market participants, the Market Operator (MOSL), government, and Ofwat must continue to come together to play their part.

We expect Ofwat to:

• work in collaboration with wider stakeholders to explore whether changes to the business retail market rules, processes and structures can deliver improvements for customers, society, market resilience, investor confidence and the environment
• continue to work with industry to focus on resolving frictions and structural challenges in the business retail market and improve outcomes for customers
• monitor and promote incumbent water companies’ support in the development of a well-functioning business retail market
• encourage retailers, where appropriate, to support non-household customers who fall behind on their payments and to proactively manage bad debt
• reduce potential disruptions to customers’ access to retail services in the event of a retailer making an unplanned exit, and to review the supplier of last resort arrangements (including highlighting and making recommendations in relation to any legislative barriers) so that they are robust for the longer-term

New Appointments and Variations (NAVs)

The new appointments and variations (“NAVs”) framework allows new market entrants to replace incumbents in providing water, sewerage or combined water and sewerage services to a specific geographic area. NAVs have the potential to play an important role in supporting the government’s ambitions to increase housing supply. We expect incumbent water companies to interact with NAVs effectively to deliver a well-functioning market, and for NAVs to comply with customer protections, including wider financial assistance.

We expect Ofwat to:

• support the development of the NAV market, to realise the potential of the market to deliver value for customers, society and the environment
• monitor incumbents to ensure they appropriately engage with NAVs to deliver an effective market
• further explore customer protections including the range of customer services, complaints handling and the development of support measures for customers who may struggle with their water bill

Developer Services/Connections market

Building new and sustainable developments can support government priorities of economic growth and environmental protections, including, nutrient neutral development at sites threatened by excess nutrient pollution. New water and sewerage connections can contribute to these goals. Therefore, the role of water companies in facilitating these activities for developers, self-lay providers, NAVs and retailers is crucial.

We expect water companies to have regard to the impact of their operations on the government’s target to increase the supply of new homes. Ofwat can play an important role in supporting these efforts so that where appropriate, water companies and home builders can work together to unlock new and sustainable property development.

We expect Ofwat to:

• promote greater collaboration between incumbents and their new connections customers, particularly on large-scale developments
• improve fairness and transparency in incumbents’ charging arrangements and further promote sustainability and environmental protections
• consider how its regulatory framework can enable water and wastewater services to support government’s ambitions to increase housing supply, in line with its duty to contribute to the achievement of sustainable development

The bioresources market

In 2020 Ofwat introduced measures to promote the bioresources market. However, Ofwat has identified barriers that may limit the growth of this market.

We expect Ofwat to:

• further promote the bioresources market
• set clear expectations that water and sewerage companies should also take a leadership role to enable the market to deliver its full potential

Appendix 1: Summary of Ofwat’s duties

Sections 2 and 3 of the Water Industry Act 1991 (as amended) place a number of statutory duties on both the Secretary of State and Ofwat.

Ofwat’s primary duties (as set out in section 2) are to carry out its relevant functions in the way it considers best calculated to:

• further the consumer objective to protect the interests of consumers ^{[footnote 1]}, wherever appropriate by promoting effective competition
• secure that the functions of each undertaker ^{[footnote 2]} are properly carried out
• secure that undertakers are able to finance the proper carrying out of their functions, in particular by securing reasonable returns on their capital
• secure that licensees (companies with water supply or sewerage licences) properly carry out their licensed activities and functions
• further the resilience objective to secure the long-term resilience of undertakers’ water supply and wastewater systems, and to secure they take steps to enable them, in the long term, to meet the need for water supplies and wastewater services

Subject to these, Ofwat has secondary duties to:

• promote economy and efficiency by undertakers in their work
• secure that no undue preference or discrimination is shown by undertakers in fixing charges
• secure that no undue preference or discrimination is shown by undertakers in relation to the provision of services by themselves or other undertakers or by licensees
• secure that consumers’ interests are protected where undertakers sell land
• ensure that consumers’ interests are protected in relation to any unregulated activities of undertakers
• contribute to the achievement of sustainable development

Ofwat may also have regard to the interests of consumers in relation to other utilities. In exercising any of its powers or duties in accordance with those duties outlined above, Ofwat shall have regard to the principles of best regulatory practice.

Ofwat and the water companies also have general environmental and recreational duties in section 3 of the Water Industry Act 1991 (as amended). Subject to the duties in section 2, these are to:

• further the conservation and enhancement of natural beauty and the conservation of flora, fauna and geological or physiographical features of special interest and to further water conservation
• have regard to the desirability of protecting and conserving buildings, sites and objects of archaeological, architectural or historic interest
• take into account any effect which the proposals would have on the beauty or amenity of any rural or urban area or on any such flora, fauna, features, buildings, sites or objects

Subject to these, Ofwat has duties to:

• have regard to the desirability of preserving for the public any freedom of access to areas of woodland, mountains, moor, heath, down, cliff or foreshore and other places of natural beauty
• have regard to the desirability of maintaining the availability to the public of any facility for visiting or inspecting any building, site or object of archaeological, architectural or historic interest
• take into account any effect which the proposals would have on any such freedom of access or on the availability of any such facility

1. Consumers are defined at s2(5A) WIA 1991 as both existing and future consumers, and the “interests of consumers” are their interests in relation to the supply of water by means of a water undertaker’s supply system […] and the provision of sewerage services.

   For the purposes of this duty, s2(2C) WIA 1991 sets out a non-exhaustive list of particular groups to whose interests Ofwat shall have regard, which consists of: individuals who are disabled or chronically sick, individuals of pensionable age, individuals with low incomes, individuals residing in rural areas, and customers who are not eligible to switch suppliers. ↩

2. That is, company holding an appointment as a water and/or sewerage undertaker. ↩