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Ofwat is launching a conversation across England and Wales on what the water sector should look like by 2040. As it embarks on the design of future price reviews, Ofwat is asking some open questions about the long term goals to meet the needs of customers, the environment and wider society.

The water sector faces a number of challenges as it looks towards 2040. The fourth industrial revolution is afoot as smart technology changes the way companies will operate. Citizens and communities increasingly expect companies, including those in the water sector, to consider the wider impacts of their operations and to deliver public value. The water sector can play a powerful role in protecting and enhancing the environment and achieving net zero while ensuring system and services are resilient to the impact of climate change and extreme weather. And meeting the challenges of the future is likely to bring mounting cost pressures at a time when affordability is an increasing concern.

All companies adapted well to the immediate challenges of Covid-19. But, there will always be lessons to learn and going forward, the industry will need to become better at anticipating and adapting to uncertainty and change. They will also need to innovate at a greater pace than before and make full use of opportunities from smart networks, nature based solutions and markets to thrive in the future.

Ofwat has launched the Future Ideas Lab in order to explore how the regulator, the water sector and wider stakeholders and decision makers can meet these challenges. This is a place for stakeholders to collaborate on the development of ideas for how the regulator should design future price reviews to meet the challenges and take up the opportunities that have been set out.

Launching the Future Ideas Lab, David Black, Chief Regulation Officer at Ofwat yesterday said:

“The water sector faces profound challenges in the years and decades to come, but as the regulator – we share this challenge. We want to look towards 2040 and beyond and drive companies to seize opportunities to best meet the needs of customers, communities, and the environment. As in any industry, water companies will need to adapt and evolve if they are to transform their performance, and face the future with confidence.”

Ofwat has also published a discussion paper to explore how customer preferences can better inform the price review process. Water is an essential service and customers increasingly expect their water companies to consistently deliver high levels of service, while responding to their individual needs. This will involve placing the interests of customers at the heart of decisions made and today’s paper seeks to explore how that can be better achieved in future price reviews.

Commenting on the launch of the customer engagement discussion paper, David Black, Chief Regulation Officer at Ofwat yesterday said:

“The customer voice must be heard more clearly, both by the regulator and by water companies that provide such an essential service. We are committed to exploring how best we can do that and look forward to working with the sector, including consumer groups to ensure that is the case.”

Notes to Editors

1. Ofwat has set 12 key questions to launch the Future Ideas Lab and seek contributions to shape the next price review and beyond. These can be seen in the PR24 launch document
2. In order to deliver effectively for the future, Ofwat has sought to learn the lessons of the past. Ofwat has engaged with stakeholders since the PR19 final determinations to gauge what has worked well and what could work better in future. These findings will seek to build on these when developing our future price review approach. Read the PR19 Lessons Learnt document
3. Customer Engagement discussion paper