Ofwat consults on its £32m work plan and future change to licence fee cap

Ofwat will consult this year on a change to the licence fee cap to fund its activities, in light of taking on additional work. The cost of its regulation is met by licence fees on water companies, which customers ultimately pay for in their bills.

That was set out in the regulator’s draft forward programme for 2021/22. Ofwat said its budget for the year ahead would be £31.8m, £1.20 per customer, including funding for RAPID and the Innovation Fund, “which contribute to Ofwat undertaking a much broader range of work than in previous years at this time in the regulatory cycle…As we proceed through the price review cycle, the cost of this additional work will require a change to the licence fee cap.”

The draft forward programme was based around Ofwat’s three strategic goals: transforming water company performance, preparing to meet long term challenges and greater public value.

As well as a breakdown by quarter of work planned for 2021/22, the paper identified multi-year work streams, including on WINEP reform, net zero and strategic water resource schemes. Ofwat added that by the end of the current period, it intended to have deepened its understanding of customers, held companies to account for improved performance, provided opportunities for investment via Direct Procurement for Customers (DPC) and RAPID; improved the effectiveness of markets; and supported the development of an improved innovation culture.

There will also be dedicated focus on Wales, including through working with Welsh stakeholders to develop a joint vision for the water industry in Wales.

Among the Q1 2021/22 work was: consulting on high level framework for key PR24 areas; considering the outline business case for the first DPC project; provisional decisions on company proposals for a green recovery; and initial thinking on how to regulate multi-party, multi-sector, large-scale water resources infrastructure solutions.