Ofwat consults on asset maturity licence condition

(Figure 1 source: Ofwat)

Ofwat is consulting until 5 September on introducing a new licence condition to require water companies to improve their asset management maturity.

The regulator said it would set out clear and binding expectations, and require companies to be certified to International Organisation for Standardisation (ISO) 55001:2024, as well as to demonstrate their ongoing improvement in maturity by undertaking regular maturity assessments using industry standard methods and tools.

The consultation was published alongside an update on Ofwat’s work, announced as part of PR24, to improve sector wide understanding of asset health for a subset of priority assets. Ofwat reported that it had undertaken four workshops since January, and had identified the following priority assets for 2025-27: network storage (including service reservoirs, water towers and contact tanks), civils at water boreholes, civils at wastewater treatment works (including settlement tanks and activated sludge treatment plants), and gravity sewers.

In the coming months, Ofwat said it will begin developing a condition grade methodology for the priority assets to support data collection, and a framework for assessing evidence provided by companies, which can then be applied to wider asset classes.

At PR24, Ofwat said it would assess whether there is a case for additional base expenditure allowances ahead of PR29 – for example, to increase the rate of refurbishment / replacement of the priority assets to address condition issues and prevent further deterioration. The update included that the first decision on whether additional allowances are required will be issued in July 2026, following the assessment of the workload and expenditure data, the condition grade and asset health data and company investment proposals.

The Competition and Markets Authority has descoped asset health allowances from its redeterminations for those appellant companies that raised it, citing Ofwat’s work as an alternative path to sort this out.