Watchdogs pledge joint working during reform transition, as they launch PR29

(by Karma Loveday)

The Drinking Water Inspectorate, the Environment Agency, Natural England, Natural Resources Wales and Ofwat have issued a joint letter to water industry leaders assuring they will work together for PR29 ahead of the formal establishment of the new integrated regulator.

The letter said: “Through our joint working programme, we will work together during transition to join up the regulatory system for companies and stakeholders, while remaining separate organisations with distinct statutory responsibilities. We will coordinate decisions and communications, engage jointly, be clear on differences between England and Wales, and take collective responsibility for integrating our approaches.

“We will shape an ambitious, joined-up approach to PR29, guided by the environment secretary’s priorities for England: build a system that delivers for the future at a fair price, deliver better results for people and the environment and put local people and places at the centre of decision-making. For Wales, the priorities will be established by the Welsh minister. Both will build on PR24 to look and feel different to previous price reviews, with greater focus on outcomes, partnership, accountability, climate resilience and tangible improvements to services for customers, communities, and the environment.” 

Working together to deliver PR29:

In parallel, the regulators published Working together to deliver PR29, a document promising “a collaborative, transparent and company-specific price review” which they said marked the launch of the PR29 process. The paper noted that “PR29 will translate government ambitions for more coordinated water regulation into practical changes to the way the price review is designed and delivered” – including a more supervisory and company-specific approach; greater transparency; a renewed focus on local priorities, regional plans, customers, the environment and water security; and investment prioritisation to secure best value and take account of affordability.

Working together to deliver PR29 also shared an indicative timeline for the price review (see image) and set out work already underway. This included: 

• Joint work conducted over summer with stakeholders to set a shared vision and direction of travel for PR29. This will be published shortly. 

• Creation of a Joint Leadership Group for England and the Welsh Price Review Forum, to provide governance for the joint development of PR29. “They will play a key role in coordinating the review and ensuring it is informed by the distinct priorities and policy contexts in England and Wales throughout the transition. The governance arrangements differ between England and Wales: water companies participate directly in the Welsh Price Review Forum, whereas the Joint Leadership Group for England brings together government and regulators, with companies involved through wider engagement on PR29.” 

• Working together on key statutory planning frameworks, including Drainage and Wastewater Management Plans (DWMPs) and Water Resource Management Plans (WRMPs).

• Plans to publish a strategy for joint working on enforcement and compliance in the new year.

• On engagement, the regulators sought “a genuine two-way conversation with companies and other stakeholders”. They called on companies to share emerging thinking and evidence openly rather than wait to present fully-developed proposals, promising to do likewise themselves. For wider stakeholders, “we will be clear about where and when stakeholder input is most valuable, what questions we are seeking to answer and how views have influenced our thinking and decisions”. 

Changes for PR29:

Finally, the paper offered a glimpse of how this will all manifest in PR29 – a process that will retain core elements of previous price reviews, including decisions on expenditure, outcomes and risk and return, but will place greater emphasis on the following:

• Long-term outcomes and value for money – PR29 decisions will be grounded in longer-term planning frameworks (WRMPs, DWMPs, River Basin Management Plans and Drinking Water Safety and Sufficiency Plans), and will build on learnings from the Major Water Infrastructure Programme (the successor to RAPID).  Nature-based and upstream solutions will be considered alongside traditional built infrastructure, and there will be focus on maintaining and improving asset health, including by considering “how forward-looking evidence can provide greater transparency about asset condition, future risks and the maintenance and replacement activity needed to secure long-term resilience”. To demonstrate best value, companies will be expected to explain the main cost drivers of their proposals, the alternative approaches considered and the implications for outcomes, risks and customer bills over time.

• A regional, supervisory approach – PR29 will take greater account of both company-specific circumstances (risks, performance, financial resilience, asset management and delivery capability) and priorities from local, regional and catchment customers and communities. The watchdogs said they would engage directly with relevant bodies including mayoral strategic authorities, and that companies should demonstrate how local, regional and catchment evidence has informed their plans. This will sit alongside benchmarking and comparative assessment, which will “remain important tools”.

• A flexible and proportional process – Consideration is underway on: how planning frameworks can be streamlined, “including how Water Industry National Environment Programme and National Environment Programme requirements could be incorporated into statutory DWMPs and WRMPs and emerging longer-term planning arrangements”; and on where the Common Options Appraisal and Assurance Framework could be applied. The paper advised: “A key change will be its application across relevant planning processes, providing a consistent basis for considering costs, benefits, risks, natural capital, deliverability and long-term value.” Plans will also need to adapt as circumstances change and evidence builds. And there will be attention on “more flexible investment pathways” such as partnership-led or nature-based proposals, and on the deliverability of proposals and companies’ capacity to deliver their plans.

Conducted during transition, PR29 will not be a fully-reformed price review, but regulators said it should offer a stepping stone to that future: “PR29 will be an important step towards a more integrated, supervisory and transparent model of water regulation. It will connect long-term and regional planning more clearly to company investment, strengthen accountability for delivery and give customers and stakeholders earlier opportunities to shape choices. The full benefits of reform will extend beyond PR29, but the review can make tangible progress through stronger joint working, more adaptable planning and clearer scrutiny of investment, while securing the investment and outcomes needed from 2030 onwards.”