Ofwat chief lists ingredients to justify investment during a cost of living crisis

The water sector needs to make a “collective step up” given it has “lost public trust and faces the extraordinary challenge of justifying a significant increase in investment at PR24 in times of crisis for customer's standards of living,” Ofwat’s chief executive David Black said last week.

Speaking at a Moody’s water conference, Black listed “five key ingredients for justifying a step up investment at PR24 in time of unprecedent strain on customers from rising inflation and falling real incomes”. These were:

• efficient operation;

• investments that are demonstrably best value;

• use of competitive procurement models;

• support for hard pressed customers; and

• corporate behaviours aligned with public expectations.

On the latter, Black said: “Companies committed to linking performance related exec pay to their performance in PR19, but currently a significant number are failing to do so. We are introducing licence changes to require dividends to be linked to performance and to tighten the regulatory ring fence to support financial resilience. I find it extraordinary that some companies have been slow to recognise the merits of these proposals given the evidence widespread public concerns.”

Black went on to tell investors: operational performance will be key to determining investor returns; financial structures must be resilient; and competitive procurement offers new opportunities for greenfield investment.