Water companies will be required to carry out to infrastructure “MOTs” to prevent major failures under plans for a new industry watchdog, the Government has said.
Ministers are set to unveil a series of reforms in Parliament as they move ahead with a major regulatory shake-up that will see Ofwat abolished and the current system of overlapping oversight by four different bodies merged into a single regulator.
The Water White Paper, which will be published on Tuesday morning, will outline powers planned for this new watchdog, which aim to put failure prevention first and strengthen accountability.
Under the proposals, water companies will have to perform health checks on their infrastructure to proactively identify crumbling pipes, pumps or issues at sewage treatment works before they fail.
The hope is that risks such as South East Water’s pipes bursting in cold weather, which recently left thousands of homes without supply, are identified in advance.
A chief engineer will also sit inside the new water regulator for the first time in two decades to bring back hands-on checks of infrastructure, so that firms “are not marking their own homework”.
Ofwat will unlikely be formally axed before 2027, and the process to establish the new regulator will be complex – meaning it is unclear when it will start operating.
But the Government will say on Tuesday that it will set out a transition path in the coming months, and a new water reform bill to bring forward the legislation needed for the system to take effect.
Environment Secretary Emma Reynolds said: “These are once-in-a-generation reforms for our water system – tough oversight, real accountability, and no more excuses.
“Water companies will have nowhere to hide from poor performance, customers will get the service they deserve, and investors will see a system built for the future.
“This builds on the tough action we’ve already delivered, from record investment to banning unfair bonuses.”
Other measures in the Water White Paper will include the setting up of dedicated teams for each company.
This will replace the current “one-size-fits-all” approach, with the aim of providing the new regulator with a better understanding of how each firm operates.
And where their performance falls short, the regulator will be able to put tailored “performance improvement regimes” in place, which means it can act quicker to fix failures.
Elsewhere, the paper outlines new “no-notice” powers for the watchdog to check water firms’ security and emergency preparedness for events such as attacks on infrastructure or contingency plans for supply issues.
Clean lines of accountability for senior executives will also be outlined in the paper in measures likened to those seen in the financial sector.
The planned changes come as part of the Government’s response to public fury over rising bills, sewage pollution and large bonuses for bosses.
Currently, Ofwat oversees how much water companies in England and Wales can charge for services; the Drinking Water Inspectorate ensures that public water supplies are safe; while the Environment Agency and Natural England have regulatory functions to monitor firms’ impact on nature.
The regulators have faced intense criticism for overseeing companies during years when they paid out to shareholders and accrued large debts, while ageing infrastructure crumbled and sewage spills skyrocketed.
Philip Duffy, chief executive of the Environment Agency, called the Water White Paper “a key milestone in turning around our water system”.
“During the transition to the new regulator, our priorities remain unchanged,” he said.
“We are focused on delivering our key services – carrying out 10,000 inspections of water company assets this year and working with our partner regulators, planners, water companies, farmers and environmental organisations to protect and enhance our water environment.”
Chris Walters, Ofwat interim chief executive, said: “The creation of a new water regulator for England will bring a renewed focus, improve the sector for customers, investors and the environment, and rebuild trust.
“In the meantime, our work continues.
“We are already working closely with (the Environment Department) and our partner regulators as the Government develops the new body, ensuring the sector moves towards a more integrated and resilient future.”
Tim Farron, environment spokesperson for the Liberal Democrats, said the White Paper “does not go far enough to guarantee the fundamental regulatory reform that was promised”.
“We must completely overhaul how water companies run,” he said.
“Liberal Democrats are calling for a new ownership model with water companies mutually owned by customers and professionally managed.”
James Wallace, chief executive of River Action, said many of the measures announced are “welcome steps”, but warned that “major gaps remain” in areas such as triggers for special administration, a commitment to restructure company investment and ownership and more ambition to tackle agricultural pollution.
“The publication of the Water White Paper signals the Government recognises the scale of the freshwater emergency, but lacks the urgency and bold reform to tackle it,” he said.
A spokesperson for Water UK, which represents the industry, welcomed the White Paper but said the focus “must now shift from diagnosis to delivery”.
“Our country will not have the environment it wants or the economic growth it needs until a new water regulator is established,” they said.
“We cannot afford for any more long-term decisions to be taken by a system everyone knows has failed.”
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