Ofwat rejects water companies’ depiction of regulation as bill-focused

Ofwat has written to the Public Accounts Committee (PAC) to address “serious concerns” with how water companies depicted PR19 and regulation more widely in an evidence session held as part of the Water Supply and Demand Management inquiry.

In a letter to PAC chair, Meg Hillier, Ofwat chief executive, Rachel Fletcher, rejected the suggestion that the regulatory system prioritises bill reductions over investment in long term resilience. She argued: “The 12% reduction in bills… is achieved principally by reducing returns to shareholders, and this takes place alongside increased investment in networks and water resources.”

Fletcher said Ofwat would cost £1.20 a customer in 2020/21 and that the £15-£16 cited in companies' evidence included all regulatory costs and licences. Finally, she challenged Yorkshire Water’s evidence “that it had been forced, by Ofwat, to scale back its ambition on leakage”.

Fletcher’s letter followed a letter dated 29 July from Hillier to Defra permanent secretary, Tamara Finkelstein, sent after the PAC's Water Supply and Demand Management report was published on 10 July, and after an evidence session was held with Wessex, Yorkshire and Thames Water on 22 July. PAC asked Finkelstein to work with Ofwat to address “some of the fundamental barriers that exist to achieving water resilience”. Finkelstein and Environment Agency chief executive, Sir James Bevan, have also corresponded with Hillier.