The Latest News From the Water Industry

PR24 is the next price review for water companies in England and Wales, setting price controls and standards from 2025-2030.

Ofwat is currently working with water companies to establish the framework for PR24, which will create value for customers, communities and the environment. They’re also exploring how markets can drive innovation and efficiency.

How Ofwat works

Water companies spend billions to bring us fresh drinking water and then collect its remains as waste water for disposal. However, as an industry that relies heavily on monopoly practices it can be difficult to compete effectively within this space.

In 1988, the water and sewerage sector was privatised through 10 publicly owned water authorities becoming private companies under Ofwat regulation under the Water Industry Act 1991. These are now known as water and sewerage undertakers (though smaller firms also provide just water services).

The regulator’s primary responsibility is to safeguard consumers by encouraging competition, assuring water companies are financially sustainable and well-run, and providing resilient supplies long term. To meet this aim, they have various powers available to them such as setting price limits or investigating violations of rules.

Who are the water companies?

Water companies operate worldwide to supply and purify drinking water. This industry represents a multibillion-dollar sector essential to many aspects of modern life such as food and beverage production, sanitation and the removal of hazardous waste.

The water industry is heavily regulated. Regulated water companies must abide by both federal and state environmental regulations.

Public utility commissions at each state regulate these utilities by setting rates that will be charged to their customers for water and wastewater services.

These utilities also contribute to their local economies through federal and state income taxes, local property taxes and permit fees associated with water and wastewater projects. Furthermore, they provide jobs with competitive wages, benefits packages and training for employees.

As custodians of their community’s water system, regulated water companies are charged with safeguarding it in terms of providing safe drinking water for citizens. Their public trust is something they take very seriously as well as playing an essential role in community infrastructure by providing funds for upgrades to local systems.

What is PR24?

PR24 NEWS provides up-to-date news from the water sector. It explores challenges faced by the sector and how these are being tackled.

It examines Ofwat’s approach to an upcoming price review due to take place in 2024. Ofwat is a non-ministerial government department responsible for overseeing water companies and setting legal, environmental, and social standards that ensure customers get fair value from their service provider.

Ofwat recently issued the paper PR24 and Beyond: Building Tomorrow Together in order to solicit contributions from the water sector on what they wish to see in a future price review framework. It sets forth Ofwat’s initial thoughts regarding four themes it believes need to be addressed to maximize value creation across customers, communities and the environment within PR24; each theme interlinks and complements another; additionally it highlights exploring ways in which innovation may be harnessed while gearing operations operations more efficient, collaborative and data driven.

What is the final methodology?

Ofwat has released the final methodology for PR24 – the water and sewerage sector’s forthcoming price review – which contains various new environmental commitments as well as setting out its regulatory framework over the next five years.

The final methodology represents a major advance for the water industry’s regulatory approach, including an array of performance measurement tools that will allow companies to show they have had positive environmental impact. Furthermore, it introduces the first national data collection scheme designed to assess quality and quantity of information gathered by water and sewerage operators.

WINEP is an intricate machine, consisting of six stages involving the Environment Agency, water companies and key stakeholders across the UK. One impressive stage features a traffic light system to identify best and worst options in each category and provide water companies with an overview of what options may make their plans. Other important stages require much planning and thought in order to strike an equilibrium between cost vs benefit for customers, communities and the wider environment landscape.

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