RAPID seeks input on regulating for strategic resource schemes

The Regulators’ Alliance for Progressing Infrastructure Development (RAPID) is consulting until 21 July on its initial thinking on a raft of regulatory and commercial framework issues relevant to the development of strategic water resource solutions.

RAPID said complex strategic resource options that involve two or more water companies or partners present new and heightened challenges to regulation. It saw benefit in establishing common frameworks to address these challenges to reduce costs, mitigate the risk of project delay, and ensure arrangements can adapt to future needs.

A discussion document published last week included the following issues.

Water allocation in drought conditions –RAPID proposed a “fair shares approach” under which different sets of customers receive a fair – which may be a similar or equivalent – level of service. The approach would be supported by incentives. RAPID noted there may be separate arrangements for cross-border supplies between Wales and England.

Investment cost recovery from beneficiaries – the paper suggested charges could be paid to the company providing the resource irrespective of usage to cover fixed costs. These could be complemented by volumetric charges set on the basis of variable costs, to encourage efficient usage of the water resource.

PR24 incentives – RAPID said as with smaller trades, exporters in strategic schemes should be incentivised to trade, while importers should at least be able to recover costs. Direct Procurement for Customers is just as applicable to joint strategic schemes as to single water company projects.

Water quality – water companies are responsible for the quality to the water they supply and must manage the risk when bringing new resources onto their distribution systems. RAPID noted: “This includes risk assessments for the whole supply chain, source to tap. Therefore bulk supply agreements must provide for suitable, preferably standardised, relationships between companies including operational protocols, data sharing and investigative support where required to ensure the protection of public health.”

The paper also detailed that a number of working groups have or will be set up to work though issues including:

• environmental regulation risk – “The group will produce an overall risk assessment across all strategic resource options and build an understanding of which schemes are most sensitive to which issues”;

• multi-sector solutions; and

• how strategic resource operations should best be coordinated once schemes take off.

On the latter, the paper noted: “This includes decisions around asset utilisation, access to capacity and volumes of water supplied. The technical complexity of co-ordinated decision making may be significant.”

RAPID’s outputs will take the form of recommendations to regulators and to the wider sector, for example in the form of standardised terms for bulk supply agreements or other contractual arrangements.