Water companies have collectively warned Ofwat that its draft decision to cut proposed investment puts urgent improvements at risk.
In its submission to the regulator’s consultation on draft determinations, Water UK has urged Ofwat to back company plans in full and ensure the right conditions are in place to allow investment.
Ofwat wants to cut a record £17 billion from water companies’ £105 billion investment proposals.
Analysis commissioned by Water UK and carried out by economic consultancy Oxera shows that, of 30 water industry investors interviewed, all had severe concerns about Ofwat’s approach and the level of risk versus the proposed return.
The report also shows that, investors – who are being asked to contribute billions in new equity to support investment programmes – have nothing like the confidence needed to provide that much of their own finance.
David Henderson, Water UK Chief Executive, said:
“Water companies want to invest £105 billion to support economic growth, build more homes, secure our water supplies and end sewage entering our rivers. Ofwat wants to cut that investment by £17 billion – a record amount.
“Ofwat has a difficult job, but investors are telling us that they need Ofwat to change its approach. Unless the right conditions to invest are put in place, our environment and our economy will pay the price. We cannot delay upgrading and expanding vital infrastructure any longer and need Ofwat to reconsider its approach.”
Water UK has listed examples of proposed investments cut by Ofwat, which include:
- £1.3bn (15%) cut from the nutrients programme.
- £2.1bn (18%) cut from the storm overflow programme. Some regions of England have seen their overflows programme cut by over 40%.
- More than £513m (8%) cut from the water supply-demand balance. The water resources side of Water Framework Directive was cut by £282m (46%).
- Net Zero investment has been cut by £619m (66%).
- Chemicals removals have been cut by £114m (27%).
- Investigation budgets has been cut by £250m (33%).
- £92m has been cut from the biodiversity programme, representing a 41% reduction.
- Ofwat has cut companies’ proposals on protecting sources of drinking water by £44m, or over 27%.
- £261 million has been cut from reservoir safety programmes, representing a 63% reduction.
- Cyber security has been cut by £184m (43%).
