Water UK commissioned Oxera to support its response to the Call for Evidence by the Independent Water Commission (‘the Commission’). This report—which expands on the findings of our previous study for Water UK (‘Investability in PR24’)—studies the investability challenge faced by the England and Wales water sector. The report explores ways in which the regulatory system can be enhanced to promote sustainable, long-term investment beyond PR24.

We identify six principles that we consider would underpin an investable regulatory framework. We recommend a principles-based approach, because there are significant aspects of the regulatory model that might change by PR29—not least as a result of the Commission’s recommendations—and these principles are important regardless of the regulatory model. These principles, and the recommendations for achieving each of them, fall into three categories:

1. Clear long-term policy and regulatory framing, to assess the long-term consumer interest.
2. Well calibrated operational regime, with consistent and proportionate risk/return profile.
3. Long-term, forward-looking, and evidence-based assessment of financeability, from equity and debt perspectives.