Source · Select Committees · Public Accounts Committee
Recommendation 2
2
Accepted
Develop common survey standards and collate data to assess water infrastructure health for business plans
Conclusion
Over many years, the Environment Agency and Ofwat have failed to ensure water companies maintain vital infrastructure. Ofwat and the Environment Agency (EA) have not done enough to ensure companies actively manage their infrastructure. At the current rate of replacement, it would take companies 700 years to replace the entire water mains network. This is far below the rate Ofwat views as sustainable and below what the water companies have been funded to do. Ofwat does not understand how to fund maintenance effectively. There are no common standards to assess the condition of infrastructure, and Ofwat’s current measures, such as sewer collapses and leakage, are backwards-looking and only measure failure. Ofwat has been looking at asset health since 2017, and work to get the right information will still take “two to three years”. This information could be collected much quicker and then acted on, ready to inform key decisions by the next price review. The Drinking Water 3 Inspectorate (DWI) inspects water supply assets, but no regulator inspects wastewater assets, nor do they have the engineering expertise to oversee company work. Failure to maintain assets has led to environmental pollution. Prevention is better than cure, but the regulators are not actively taking a preventative approach. They should do much more. recommendation Ofwat and the Environment Agency, working with the sector, should develop survey standards and collate information to assess the health of infrastructure in good time for companies to use the results to inform business plans which are likely to be submitted in autumn 2028 and implemented shortly thereafter, and a programme of inspection to ensure infrastructure projects funded in PR25 are completed to satisfaction and deliver value for money.
Government Response Summary
The government agreed, committing to publishing a White Paper this autumn, Ofwat developing a new asset condition assessment methodology by 2027, and the Environment Agency increasing staff. Both regulators are also developing a Delivery and Monitoring Framework for water industry investment, to be ready in the first half of 2026.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee's recommendation. the long-term assessment, monitoring and maintenance of asset health in the water sector, in addition to recommendations to improve assurance of infrastructure delivery. The government is considering the Commission's recommendations and will respond to them in its White Paper, due to be published for consultation this autumn. Ofwat is consulting on the implementation of a new asset management licence condition which will require companies to gain external certification to the internationally recognised Asset Management Standard as well as provide updates on their progressing maturity. To address some water companies’ relative weakness in asset management maturity, Ofwat is progressing a number of themes of work including developing an asset condition assessment methodology. Companies will be expected to apply this methodology using a combination of existing and new inspection or survey data. The resulting insights will inform investment proposals submitted through the PR24 cost change process and future price reviews. Ofwat estimates that, building on data collected at PR24, it will have data that accounts for around 80% by value of the sector’s asset base by 2027. This is an ambitious project which will consider different ways of providing regulatory assurance, and Ofwat will give careful consideration to what is deliverable and proportionate. The Environment Agency has increased the number of staff dedicated to regulating the water industry by 440, including regulatory officers, data analysts, and enforcement specialists. Understanding whether infrastructure projects funded in PR24 are completed as required will be part of the regulator's inspections. The evidence being gathered will inform future annual performance assessments, investment plans, and proactive enforcement action. The Environment Agency and Ofwat are also developing a Delivery and Monitoring Framework (DMF) to ensure the timely completion of the water industry investment programme. This will be ready in the first half of 2026. This will track the completion of enhancement actions and report on progress and enable the sharing of intelligence across water regulators.