simosim - Connections in the Water Industry


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Regulation

The Water Industry


“The UK water industry is under more scrutiny and water is becoming ever more important as a commodity. The regulators are learning to be more stringent and the demand from the environment appears to be ever changing”

History of Privitisation

Privitisation occured in 1989 when Defra (
Department for Environment, Food and Rural Affaires) established a strategy for a three divisional water system, this would form the foundation for the future of the water industry in the United Kingdom and would have a bearing on the approach taken to asset management and hence asset performance.

Effectively this meant all water assets including infrastructure and non infrastructure for England & Wales would be owned by a private company, these companies although financed by shareholders had a duty to supply clean water to both domestic and trade effluent customers and a duty to accept effluent from domestic and trade effluent customers.

Regulation in England & Wales

A regulatory body (Ofwat) was set up to monitor, evaluate and ensure fair customer service which effectively enabled the UK Government to be the strategic stakeholder and ensure quality of supply and service. Above all provide consistent value for money ensuring that privatisation provided continuous investment.

To ensure these new private companies provided evidence for asset management funding, an Asset Management Period (AMP) was accordingly introduced. Currently water companies in England & Wales are operating in the fourth period since privatisation where each AMP period lasts for a period of five years and at the end of each AMP period planning will begin for the next period (this is referred to as the PR process - Periodic Review).

Prior to each new AMP period the regulator will make a decision on the amount of money each water company can demand from customers, this effectively means the regulator sets the price limits. It is at this planning stage which now acts as the vital tool to accessing the way the water company will run itself over the subsequent AMP period and assertion how much money they will have to carry out the desired work. The water companies will look to fund both Capital & Operational expenditures which will include maintaining the base level of service (Capital Maintenance) and provide planning for areas such as Flooding, Catchment Growth, Rehabilitation and Quality.

Regulation in Scotland

Scotlish water and waste water is regulated by WICS (Water Indsutry Commission Scotland), it is a non-departmental public body with statutory responsibilities who are based in Stirling. They were established in 2005 and took over responsibility for regulation from the former Water Industry Commissioner for Scotland.

Scottish Water are 85 per cent funded from customer revenue and 15 per cent from borrowings and their debt is part of the Scottish public sector borrowing.


Similar to England and Wales a price review is held every 5 years to determine the funding required for the next period, this will again cover both capital and operational costs.

Northern Ireland

They are a Government Owned Company, with substantial independence from government. They have five regularos to ensure a fair customer service is delivered;

The Consumer Council - The Consumer Council is an independent body that promotes and protects the interests of all consumers in Northern Ireland

Utility Regulator - From April 2007, water and sewerage will be regulated by the Northern Ireland Authority for Utility Regulation 'Utility Regulator - electricity, gas, water' (previously Ofreg

The environment and heritage service - The Water Management Unit (WMU) is a Unit within the Northern Ireland Environment Agency which has responsibility for the protection of the aquatic environment

The Drinking Water Inspectorate - Responsible for regulating drinking water quality in Northern Ireland and is a unit within the Environment and Heritage Service.

Usefull Hotlinks

Ofwat - www.ofwat.gov.uk

WICS - www.watercommission.co.uk

DEFRA - www.defra.gov.uk







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