Ofwat to tweak Wholesale Charging Rules to promote water efficiency

(by Karma Loveday)

Ofwat is consulting until 30 July on small changes to its Wholesale Charging Rules (WCRs) and associated Charging Scheme Rules, to support water companies to attach greater consideration of water scarcity when setting their wholesale charges, and to encourage more tariff innovation.

The regulator consulted in August 2025 on options for how it might amend its WCRs to promote water efficiency in the face of water scarcity. It also considered whether to pursue alternative structures to the current approach of offering discounts for volumetric charges.

In May it set out its decision to proceed cautiously, not mandating any particular charging structure (beyond supporting the policy choice to phase out falling block tariffs by 2030), but instead encouraging water companies to trial new tariff options. Responses to the consultation highlighted the complexity of making changes in this space, and the need to proceed on an evidenced basis.  

The current consultation gives effect to decisions to:

• Amend rule 15 ("Charging structures must reflect the long run costs associated with providing the relevant service") to clarify that long run costs include those associated with addressing water scarcity (Option 3 in the August consultation).

• Amend rule 16 (the conditions for differences in charges between larger and smaller users of water) to allow differences in charging to be based on incentives to promote water efficiency and the associated environmental and wider societal benefits. (Option 4a in the August consultation).