Ofwat announces plans for the next five years

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OFWAT has finalised its price review for 2020-25 by confirming a major investment programme to ‘improve services for customers and the environment.’

The regulator has revealed a spending package of £51bn for the next five years.

A quarter of this, around £13bn, will be investment dedicated to ‘providing resilient services and a better environment in the face of a growing population and climate change.’

Rachel Fletcher, Ofwat Chief Executive, said: “Today we’re firing the starting gun on the transformation of the water industry backed by a major investment programme to deliver new, improved services for customers and the environment and resilience for generations to come.

“Now water companies need to crack on, turn this into a reality and transform their performance for everyone.

“They will be investing the equivalent of an extra £6 million each and every day to overhaul services, strengthen their infrastructure and improve our natural environment. And at the same time, customers’ bills will fall by an average of £50 before inflation.”

Customers will also see a reduction in average bills of about £50 before inflation.

The regulator has secured this by demanding greater efficiency, passing through lower financing costs and promoting more innovation.

Ofwat has set new targets for water companies in the next five years. These include:

  • Cutting leakage by 16% – saving enough water to meet the needs of everyone in Birmingham, Bristol, Cardiff, Leeds, Liverpool and Sheffield
  • Identifying and helping an additional two million customers who need extra support
  • Investing over £1 billion to protect communities at risk of flooding
  • Reducing pollution into rivers and streams by almost a third
  • Preparing for drier weather by providing £450 million to explore new water resources such as reservoirs or moving water from where there is lots to places with less.

The £13bn of additional investment – equivalent to £6m every day for five years – will, among other things, see a new reservoir built in Hampshire and the construction of a pipeline connecting water supplies from North Lincolnshire to Essex.

The regulator is also allowing Thames Water to bid for up to an additional £480m to deliver improved service resilience.

To access this, they will need to pass a series of tests and Thames’ investors will also need to provide ‘substantial’ additional funding.

Commenting on Ofwat’s announcement, Water UK Chief Executive Christine McGourty said: “Today’s announcement is a highly important one as the industry looks to deliver for customers and for the environment, today and in the future.

“Companies will now take time to work through all the details as they consider the implications of this tough price review for the years ahead.”