Recommendation 45

HM Government · verbatim extract Deferred

Ofwat continue to prioritise long-term investment by focusing their regulatory approach to support long term customer and environmental outcomes. Alongside investment, it will be important for the water industry to innovate, make use of nature-based solutions, and work collaboratively. We have signalled the importance of resilient wastewater services and the increased use of nature-based solutions in the recently published Strategic Policy Statement for Ofwat. Ofwat supports companies investing for the long term and demonstrated such support in PR19, with £7.1 billion already being invested in the environment, including £3.1 billion specifically on storm overflows. Given the challenges we face, Ofwat is increasing its focus on the long term in PR24. Ofwat’s five-year price reviews are staging posts in the overall trajectory toward improved long-term outcomes. With that in mind, Ofwat have proposed that companies will be required to develop long term delivery strategies. Through these plans companies will need to think carefully about how they sequence their activities and investments over the next 25 years and beyond, in line with wider strategic planning frameworks such as Drainage and Wastewater Management Plans. Water companies will need to demonstrate that their investments are explicitly linked to their long-term strategies. Ofwat is establishing a package of common performance commitments to measure long term outcomes. This will help to increase the confidence of companies that in the future, the regulatory regime will recognise the benefits of long-term investments through our outcome delivery incentives (ODIs) regime, which incentivises companies to meet service levels, and to exceed them where this is expected to deliver greater value. Ofwat continue to actively engage with the industry and other stakeholders to understand whether there is more that we can do in our cost assessment approach to better take account of the long-term.