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Understanding UK Water Industry and it’s Regulators

Updated: Jan 28


Uk Regulators doing an inspection

Water is a vital resource that plays a fundamental role in sustaining life, supporting economic activities, and ensuring well-being and health of people. 


In the United Kingdom, the management and provision of water and wastewater services are carried out by a complex and highly regulated industry. 


Understanding the UK water industry is crucial not only for those directly involved in its operations but also for the general public who rely on a safe and reliable water supply and its wastewater treatment and discharge back into the environment. 


Water quality in the UK is in the top six countries of the world and is considered safe to drink.


This article aims to provide an overview of the key aspects of the UK water industry, its history, regulation, challenges, and future prospects.


History


The UK's water industry has a long and complex history dating back to the 17th century when private companies initially provided water services. 


However, it was during the 19th century that the rapid industrialisation of the country led to the growth of urban areas and a subsequent demand for centralised water supply and wastewater systems. This led to the establishment of municipal waterworks and the birth of the modern water industry.


Key Players


The UK water industry is composed of various stakeholders, including water and wastewater service providers, regulators, and customers. The primary players include:


Service Providers


There are numerous water and sewerage companies (WASC) in the UK, each serving specific regions. These companies are responsible for the collection, treatment, and distribution of drinking water, as well as the collection and treatment of wastewater.


There are many water only companies (WOC) responsible for the collection, treatment, and distribution of drinking water. 

And more recently there are new appointments and variations (NAVs) which are limited companies providing water and/or sewerage service to customers in an area which was previously provided by the incumbent monopoly provider such as a WASC or WOC.


Regulators and Regulations


The UK water industry is one of the most heavily regulated sectors in the country. 


There are several key regulatory bodies that oversee the UK water industry and it can seem a complex patchwork of regulators and regulations.  


With devolution in the 1990s came the creation of the Scottish Parliament, a National Assembly for Wales and Northern Ireland Executive each with a different range of powers.


Each government in the UK has its own regulator overseeing the economics and financial aspects, water quality, environment and the newly formed NAVs.


It is diverse, all with their own remit, targets and interest to govern and regulate the Water Industry and the Environment.


Economic Regulator


Ofwat (Water Services Regulation Authority) as the economic regulator oversees England and Wales, whilst Water Industry Commission for Scotland (WICS) oversees Scotland and Scottish Water.


Ofwat, sets price controls and performance targets for water companies in England and Wales on a 5 year financial cycle. It strives to balance the interests of customers and investors, ensuring that customers receive high-quality services at reasonable prices.


In Scotland, WICS have moved to a 6 year financial cycle which benefits the water company, customers and the supply chain enabling a longer financial investment cycle.


In Northern Ireland the cycles are not as set and capital investment is still required to be on par with England and Wales per head of population.


Drinking Water Quality Regulators


The Drinking Water Inspectorate (DWI) governs the regulations and holds water companies to account in England and Wales.


Similarly, in Scotland the Drinking Water Quality Regulator (DWQR) holds Scottish Water to account.  The DWI for Northern Ireland is within the Northern Ireland Environment Agency and oversees Northern Ireland Water.


Environmental Regulators


Logos of different Environmental Regulators in UK


When it comes to the environmental regulators there are four in the UK overseeing all abstractions and discharges into the environment.


The environmental regulators focus on environmental protection, including managing water resources, and ensuring compliance with environmental regulations.


The Environment Agency (EA) governs England, The Natural Resources Wales (NRW) governs Wales, Scottish Environment Protection Agency (SEPA) and Northern Ireland Environment Agency (NIEA) governs Northern Ireland. 


Prior to our exit from the European Union, the EU's remit was to hold our government to account. Since our exit, England has created a new body known as the Office of Environmental Protection (OEP).


The OEP was legally created in November 2021, under the Environment Act 2021. Their work covers England and Northern Ireland and also covers reserved matters across the UK (a matter on which only the UK Parliament in Westminster can make legislation). They are an independent non-departmental public body, sponsored by the Department for Environment, Food and Rural Affairs (DEFRA). 


The Interim Environmental Protection Assessor for Wales (IEPAW) oversees the functioning of environmental law in Wales. It also provides advice to Welsh Ministers to improve environmental outcomes. 


This is an interim process in Wales while a permanent body to oversee compliance with environmental law is being developed. Its focus is on the functioning of environmental law, not on breaches of that law.


The regulatory framework encourages sustainability, and efficiency while holding companies accountable for their performance. Companies that fail to meet their regulatory obligations can face penalties, making the industry accountable to both its customers and the environment.


Retail Market Operator


Market operator (MOSL) is an overseer for the non-household water retail market in England, which opened in April 2017 enabling more than 1.2 million business customers to choose who supplies their water and wastewater services.


They sit at the centre of the market, with access to central market data, processing more than 90,000 transactions each day through the Central Market Operating System (CMOS).


OFWAT works closely with the MOSL to assess the performance of the business retail market in England, challenging wholesalers and retailers to all play their part in maximising benefits to customers.


Customers


Residential, industrial, and commercial customers are vital stakeholders, and their needs and concerns shape the industry's direction.


Regulatory Focus


For the next price review period - a 5 year business planning period starting in 2025, OFWAT has set out key areas of focus for water companies in England and Wales to include:


  • To transform water companies’ performance for customers

  • To drive water companies to meet long-term challenges through increased collaboration and partnerships

  • For water companies to serve a wider public purpose, delivering more for customers, society and the environment.

Success will mean that the industry will know what is expected of it in the long term. This should drive innovation, collaboration and other near-term actions such as developing people with the new skills the industry needs to face up to the future according to OFWAT. 


Future of the Industry


Overall, there will be a drive for companies to improve the environment while delivering services people can afford.


The UK water industry is evolving to meet these challenges. Water companies are investing in infrastructure upgrades and innovations to improve water efficiency and reduce environmental impact.


They are also focusing on improving customer service and affordability. 


The government is encouraging collaboration between water companies to develop regional solutions and is actively working on policies to address water scarcity and climate change impacts.


Conclusion


Understanding the UK water industry and its Regulators  is essential because it affects the daily lives of every one of us. 


The industry's complex history, regulatory framework, and ongoing challenges make it a critical sector in the UK's infrastructure.


As the industry evolves, a balance between environmental sustainability, affordability, and the quality of water and service remains at the heart of its operations, ensuring that water continues to be a reliable, affordable and accessible resource for all.


If you are interested to learn more about the UK Water Regulations this is also covered in our 4 mornings water training course that we deliver in behalf of the Institute of Water.


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