Recommendation 1
For future plans, Defra needs to understand the costs and deliverability of targets and the impact on customers' bills.
Source · National Audit Office
Regulating for investment and outcomes in the water sector
This report examines water regulators effectiveness in ensuring the nation’s future water supply and attracting necessary investments.
Published: 25 Apr 2025
Recommendations: 9
Type: Value for Money
NAO confirmed: 8
Department: Department for Environment, Food & Rural Affairs
Recommendations
Recommendation 2
Defra should consult on options to ensure delivery of a coherent national system plan for water, including balancing trade-offs between different duties.
Recommendation 3
Defra should address gaps in responsibilities, particularly around the wastewater network, and ensure regulators work together to achieve the same outcomes for the environment and customers.
Recommendation 4
EA must understand whether actions in water company plans are being delivered and having the intended impact and delivering statutory environmental targets.
Recommendation 5
EA, Ofwat and DWI should align deadlines and limit inconsistencies in planning timelines and assumptions.
Recommendation 6
Given the limited progress in developing a common understanding of asset health, Ofwat should continue to work with the sector, EA and DWI, reach a conclusion, and deliver its Roadmap for enhancing asset health understanding in the water sector on time.
Recommendation 7
Before the development of PR29 methodology, Ofwat should consider whether it can act to simplify the price review methodology. This should include evaluating the impact of outcome incentives on company performance, the impact of cost benchmarking on company behaviours and financial resilience, and the impact of price control deliverables on performance.
Recommendation 8
Before the development of PR29 methodology, Ofwat should seek to understand whether successful Innovation Fund projects are being taken up across the sector and the impact.
Recommendation 9
Ofwat should develop a view on how to identify and plan for investment needs over the long term and work with Defra and the other regulators to improve transparency and predictability in light of the recent sector downgrades.