Following a recent consultation, Defra has published its Strategic Policy Statement to Ofwat. Full details are available here, but some of the key points are:

1. No substantive changes from the draft statement – the wording of some points / objectives has moved away from “Ofwat should work with” to be more challenging for both the regulator and companies.
2. Defra expects Ofwat and companies to push further to increase resilience in water and wastewater services as well as for the environment. Ambitious, innovative solutions are expected with stretching targets to measure performance.
3. Companies should plan and invest “with a view to delivering the best value for money over the long term, considering the wider costs and benefits to the economy, society and the environment”. This is a strong theme and is repeated throughout the statement.
4. Collaboration with other water companies and other water users in catchments is expected. Defra expects “Ofwat will promote greater collaboration to enable….options to be taken forward where they represent best value for money over the long term”.
5. New markets are a “vital tool in Ofwat’s mission to secure a fair deal for everyone” and “we want to use competition to help achieve our ambitions”.
6. After the consultation period, some of the language around protecting customers as markets are introduced has been strengthened slightly.
7. Ofwat will continue to develop the evidence base for a decision on household competition – though an approximate timescale has been removed.

Other points and themes

• Defra wants a water industry “that works for everyone: one that is resilient, efficient and innovative and which takes forward the objectives of our industrial strategy”. It expects the sector to be “transparent, accountable” and “rises to the challenges set out…and measures its performance by how it addresses these”.
• Two primary priorities for Ofwat – securing long-term resilience and protecting customers. Defra expects Ofwat to promote markets which support these priorities.
• Companies should take account of the “full range of pressures” on their systems and “develop and excellent understanding of long-term needs”. This includes improving long-term planning for wastewater needs.
• “The sector can do more…to help those who cannot afford their bills” and Ofwat is expected to challenge companies to increase the amount of support they provide to vulnerable customers.
• Ofwat should “explore the full range of ways in which it can bring competitive pressures to bear in the water market” to achieve government’s objectives.
• Ofwat will continue to work with government on developing the evidence base for household retail competition before a decision is made.

Defra has also published summary of responses to the consultation, available here.