Possible Economic Impacts of Covid on the Water Sector Ofwat, Water UK and selected water companies have set up a working group to collaborate on increasing their joint understanding of how Covid-19 is impacting the water sector, how the sector can best respond and the potential impact on stakeholders.
The organisations will work collaboratively to understand better the impact the Coronavirus pandemic is having and could potentially have in the future on water companies, the risks and opportunities this presents and the resulting impacts on customers, investment/investors and the environment.
A joint memorandum of understanding setting out the purpose of the collaboration and the scope of the work says the impact of Covid-19 on the water sector is at present unclear and requires study.
The joint work will consist of three work streams.
- Work stream 1will aim to develop a set of common economic, social and behavioural change scenarios that the sector may be subject to. The scenarios are intended to form a common basis for comparison and stress testing of various Covid-19 effects.
- Work stream 2will identify which aspects of water company businesses may be significantly impacted (positively or negatively) in the scenarios developed in Work stream 1 and analyse the impact that Covid-19 has had on these identified aspects to date. It will also consider what mitigation activities the sector has (or could have) undertaken or may still be able to undertake. The work stream will also aim to capture any opportunities that may arise to do things differently and deliver improvements for customers, opportunities for investment/investors and enhancements to the environment.
- Work stream 3will look to estimate how companies may be affected under the scenarios developed in Work stream 1. This will be done both on a conceptual basis, and through engagement and testing with selected water companies taking into account company specific impacts.
The work will recognise that price controls are set with an expectation that water companies and their investors will need to deal with changing circumstances, including exogenous shocks
Ofwat and Water UK have formed an Advisory Group of 4-5 representatives each from industry and Ofwat with the former chosen to reflect the diversity of companies, including a water-only company.
The Advisory Group will oversee all three work streams.
Click here to read the memorandum of Economic impact of Covid-19 on the water sector