Source · Select Committees · Environmental Audit Committee
Recommendation 71
71
Paragraph: 350
Ofwat’s economic regulation of the sector through previous price reviews does not appear to have...
Recommendation
Ofwat’s economic regulation of the sector through previous price reviews does not appear to have given sufficient priority to the preservation of natural capital. We recommend that, when it publishes its review methodology in 2022, Ofwat set out how it intends to reflect natural capital fully in its economic regulatory decisions for Price Review 24. PR24 must encourage water companies to make a substantial increase in their investment in nature-based solutions, so as to improve the quality of effluent being discharged from sewage treatment plants.
Paragraph Reference:
350
Government Response
Not Addressed
HM Government
Not Addressed
Ofwat agree that wherever possible a natural capital approach should be used in economic decision making. Ofwat will strive to reflect a natural capital approach in their decision making for the next Price Review (PR24). Water companies will need to provide high quality data to make this approach work. Most environmental improvements for PR24 will be determined by the Environment Agency as part of the Water Industry National Environment Programme (WINEP). As part of the WINEP taskforce, alongside Defra and the Environment Agency, Ofwat has introduced a natural capital approach to assess the environmental implications of WINEP proposals. The process of introducing natural capital metrics into decision making needs to be done in an informed, planned and consistent way. In turn, Ofwat need to be confident that the data underlying any metrics is robust enough to support the right outcomes at a price review. In addition to the changes introduced to the WINEP, Ofwat is looking to introduce other ways of measuring and rewarding natural capital improvements in PR24 for example through a biodiversity performance commitment. Ofwat has agreed to continue working with the Environment Agency and Defra on future improvements to the WINEP, including improvements to ensure that water company decisions become further integrated into natural capital planning.