Ofwat claims work is in hand to address sluggish asset replacement rate

Ofwat has agreed with the National Infrastructure Commission’s (NIC) assessment that water main renewal rates should increase and that a more consistent approach to asset health across the industry would be helpful, but has indicated work is in hand to address this.

In a recent letter to Ofwat, the NIC said underground asset replacement rates should be “significantly higher” and the regulator should develop a more consistent and forward looking approach to measuring asset health.

In its response Ofwat includes points on renewal rates and consistency.

Renewal rates

Ofwat asserted: “Following privatisation, Ofwat allowed customer funding for a drinking water quality improvement programme that led to large parts of the water mains network being improved. This resulted in an average mains renewal rate of 1.4% per year before 2008. Since the end of the quality programme renewal rates have reduced to 0.5% per year. This reflects that over 40% of the network is less than 30 years old and modern pipes can often last over 160 years. The data on a range of measures of asset performance - mains repairs and bursts, supply interruptions and leakage - has been improving steadily over the long term. We want to see companies improving their renewal rates to address future challenges and meeting their duty to maintain an efficient and economical system of water supply.”

Consistency

Ofwat recommended companies improve their asset management capabilities when it published its Asset Management Maturity Assessment in 2021and set out an ambition to evolve its monitoring approach to help “form a holistic and more complete view of asset health and wider operational resilience in the sector” in an operational resilience paper. Ofwat said work would continue in PR24.