Managing assets effectively set to become a licence requirement

(by Karma Loveday)

Water companies will need to demonstrate they have a fit-for-purpose asset management system in place, under plans from Ofwat to introduce a new licence condition.

Following a June 2025 consultation which the regulator said was broadly supported, Ofwat is now consulting until 17 July on introducing a new licence condition under section 12A of the Water Industry Act 1991 to set clear expectations on asset management standards and to require evidence to prove these are being met. That evidence will take the form of an ISO certification or a qualified independent third‑party assessment. Ofwat said it had taken note of feedback to its previous consultation and will not mandate ISO 55001:2024.

Under the proposals, companies must:

• Understand their assets (condition, criticality and performance). 

• Understand the asset-related risks to service and the environment.

• Develop and deliver mature, well-justified business plans to fund maintenance and enhancement of their assets.

• Deliver the right outcomes, from short-term serviceability to long-term requirements (including the impact of climate change on assets).

The move is in keeping with Independent Water Commission and White Paper policy. Ofwat also explained that its analysis shows uneven standards across the sector, with the 2021 Asset Management Maturity Assessment (AMMA) revealing a big variation between companies. It added  that progress since then had been slower than expected – hence the move for compliance-driven action, which will carry a mechanism for regulatory intervention. However, Ofwat also took care to showcase good practice, with positive examples of strong asset management from Affinity Water and United Utilities included in its press release.

Ofwat will run another sector-wide AMMA this year, to assess maturity, support sector learning and help establish a clearer baseline of asset management capability across the sector, enabling it to target future interventions and support where it can have the greatest impact. Early insights are expected from this in early 2027, with the licence condition due to come into force in 2028.

In light of the new condition, Ofwat plans to remove Condition L: Underground Asset Management Plans.