Ofwat reports leakage success and wastewater shortcomings in Service Delivery Report

Water companies put in a mixed performance in Ofwat’s Service Delivery Report for 2020-21, which monitors components of outcome delivery and expenditure that are of enduring importance to customers. The regulator grouped the companies as follows:

• sector leading – Anglian, Severn Trent and Portsmouth achieved a high proportion of key common outcomes measures while demonstrating emerging evidence of cost efficiency;

• lagging behind – Southern, Thames, Bristol, South East and SES achieved only a small proportion of key common outcome measures; and

• average – All other companies achieved most of their outcomes measures but the report said there was scope for improvement to deliver higher levels of service and cost efficiency.

Ofwat said: “In particular, there remains scope for South West Water to make significant improvements on pollution incidents and consider whether reinvestment of efficiencies realised in its wastewater business can deliver the level of service its customers deserve and better outcomes for the environment.”

In terms of outcomes, the report found companies coped will with Covid, and continued to do well on leakage “after years of stagnation:” 13 firms achieved their 2020-21 targets and some are making considerable progress towards their 2024-25 targets. In contrast, it found wastewater services were not good enough: only three wastewater companies achieved their target for reducing internal sewer flooding and, although just over half of companies achieved their target to cut pollution incidents, the performance of many has stagnated or deteriorated in recent years

Ofwat argued 2024-25 targets are achievable, pointing to the priority services register, water supply interruptions, internal sewer flooding and pollution incidents goals, where at least one company in each case already exceeded its 2024-25 target. It also noted that companies are spending in excess of their wholesale cost allowances by 1% on average, partly due to early investment to improve outcome delivery. “This is in contrast to the first years of the 2015-20 price control period when average expenditure was 6% less than allowances.”