Ofwat moves to modify licences

Ofwat is consulting until 19 October on proposals to simplify water company licences.

The regulator said it had worked with the sector over the past year to identify areas where licences can be simplified and streamlined, to make it easier for: companies to understand what is expected of them; Ofwat to determine whether companies are complying with their obligations; and stakeholders to understand for what the regulator will hold companies to account. It proposed changes to all licences, aimed at:

  • simplifying the language and structure of the licence;

  • removing conditions or reducing and rationalising conditions which are no longer relevant or do not reflect the environment in which companies now operate; and

  • updating the requirements of the licence where needed to reflect the current policy drivers and align with other requirements.

The move is aligned with Ofwat’s aim to challenge water companies to improve service and governance. The regulator said: “To achieve this, it has become clear that the way in which companies are regulated is transparent, and that there is simplicity and clarity about the standards and requirements for which the regulated companies are held to account. Because licences are a key tool in holding companies to account, it is important that licences reflect that transparency and clarity. Therefore Ofwat considers the simplification and modernisation of licences to be an important underpinning of our strategy.”

Ofwat pointed out it had purposely “avoided in this package of work cutting across those conditions which might give rise to more substantive issues or on which we are currently doing other work”, such as:

conditions that are fundamental to the operation of the price review process currently in progress (Condition B);

conditions it anticipates consulting on separately to bring all companies up to the same most up to date standards and/or to strengthen ring fencing conditions (Conditions F (except accounting), K and P); and

conditions only recently created for the operation of the retail market (Conditions R and S).”

Subject to agreement, the aim is to amend the licences by 19 December 2018.