The Independent Water Commission—implications for regulation
This week brought the publication of the Independent Water Commission’s final recommendations for reforming the England and Wales water sector. The report identifies a set of recommendations intended to drive a ‘fundamental reset’ in the industry and restore public trust.
In this note, we explore five aspects of the Commission’s recommendations that have significant implications for the economic regulation of the water sector, and potentially for other sectors. These are:
- Providing clearer strategic direction – including the introduction of National Water Strategies for England and Wales and new Ministerial Statements of Water Industry Priorities.
- Merging the economic, environmental and water quality regulators – including the abolition of Ofwat.
- A new supervisory approach to regulation – with supervisory teams engaging with individual companies and informing price reviews, target setting, and early interventions.
- Changes to price reviews to balance investability and accountability – including extending the role of the CMA to produce a common cost of capital (WACC) methodology to be applied across the regulated sectors.
- A new approach to asset health and resilience – including the introduction of statutory resilience standards covering both system infrastructure and supply chains.
This is not intended to be an exhaustive review of the full suite of recommendations made by the Commission, and we intend to cover other recommendations in future publications.
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