Ofwat chief defends water regulation regime

Chief executive David Black said some companies have fallen short but defended the regulation regime.

16 August 2022

The head of Ofwat has defended water regulation, saying targets for areas such as leaks are “challenging but achievable”.

David Black, chief executive of the water regulator for England and Wales, said he does have concerns about the performance of some companies, but also said there “isn’t sufficient account given” for what is happening in the sector.

The Ofwat chief executive’s comments come amid renewed scrutiny of water companies during a period of drought and with some areas of the country facing hosepipe bans.

Speaking to BBC Radio 4’s Today programme and asked if the targets set for leaks are tough enough, Mr Black said: “Yes, we set challenging but achievable targets for water companies, leakage being one of them.

“So at the last price review we challenged the sector to reduce leakage by 16% and the latest information we have shows that 13 out of 17 companies (are) on track to deliver that in the first two years.”

He added: “I can point elsewhere in the (targets) regime where fewer companies are succeeding, so for example on pollution incidence less companies are successful.

“So we have set challenging targets and in fact at the last price review four out of 17 companies appealed our determination. So they thought the determination was too tough, and one of their contentions was that the targets were too challenging.”

Mr Black said: “Where companies are falling short on leakage they will incur penalties on that. It may be that they are outperforming the regime elsewhere. But overall the sector as a whole has underperformed against the price review thus far into the period.”

He added: “We certainly agree that customers should get better service and expect better service and that’s why we have set performance targets that aim in every case to drive better performance from companies.

“There are some companies like Thames Water which have been repeated poor performers and we have taken action against them and other companies.”

Asked how having 11,000 leaks could not be in breach of targets, he said: “Water companies have 350,000km of pipes underground. There are obviously risks of leaks right across the networks.”

But he added water companies need to “monitor and manage this better”.

Asked if he thinks there is nothing wrong with the system, Mr Black said: “No, I think that companies like Thames and Southern really need to up their game. I think it’s very concerning that other companies that may be performing better in the sector it casts a long shadow when we see poor performance.”

Asked about people who think that regulation has failed, he said: “We think there isn’t sufficient account given for what’s actually happening in the system. So we appreciate it is complex, it is difficult to understand.

“We are determined to drive better outcomes from company performance. Companies have fallen short, we will hold them to account. We think customers deserve better, and we will keep pushing the sector to work harder and to do better.”

Mr Black also said there is more to making the system resilient than targets, but defended investment in the sector since privatisation.

He said it is not true that investment has dropped every decade since privatisation, adding: “The data on Ofwat’s website shows that investment has been largely constant over time, but net investment in the sector has increased by fourfold since privatisation.

“There has been substantial investment in the sector. Over £170 billion since privatisation.”

Mr Black added: “We have 18 strategic water resource schemes being funded to be developed for the next price review. These are major new water reservoirs, major water transfer schemes.”

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