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Now more than ever the water sector needs a voice

10 February 2010

Ofwat chief executive Regina Finn has announced a "root and branch" review of the water regulator's functions and powers and, indeed, of the regulation and structure of the entire water industry. You might say this is all the rage at the moment. Ofgem has been looking at its regulatory formula and at the structure of the energy industry, and its research has revealed some unpleasant home truths.
Asked why Ofwat was a little late to the party, Finn said the industry's need for stability meant the price determination had to be completed before such a fundamental review could be undertaken, and there is something to be said for that.
Late or not, it is certainly welcome. There is no doubt that companies need new thinking to cope with the ramifications of population shifts, climate change, a new investment landscape and much else. The old landscape of "black box" water monopolies has to evolve.
It is hoped that not just water companies step up and respond to the review, but also other groups that have an interest in the way water is managed and supplied. No group can afford to miss this opportunity to have its say. However, Ofwat's initiative makes it all the harder to understand why the water industry has chosen this moment to cut back on its lobby organisation, Water UK.
It is true that the industry is facing a tough determination, and that it has to be sure that its activities are carried out in the most efficient way possible. That will prompt soul searching and reassessment from top to bottom in the industry. We have seen staff numbers slimmed already in many companies.
But even without the Ofwat review, it seems a strange time to decide that the policy team, for example, can be cut.
Within a few short months we will have a new government to deal with - of whatever stripe. At this stage it seems possible that the result will be a hung Parliament, which some suggest would mean we would have another election relatively quickly. Not only that, but there is an immense pile of policy (maybe?) still in the in-tray. The Floods and Water Management Bill now going through Parliament covers just a small number of the changes already agreed as priorities. The ramifications of the Walker, Cave and Pitt reviews are still being worked out.
Issues such as the transfer of private sewers to water companies could have a dramatic effect on the entire water industry.
And then there is the Ofwat review to consider.
Of course, water companies can address these issues individually, but unless the companies - and a slimmed down Water UK - are effective at working together, the decision to weaken the lobby group could prove costly. No doubt it is difficult to rope together the interests of the small water-only companies and the large water and sewerage companies, but Water UK has done a good job of maintaining that difficult balance.
Back when Ofwat published its draft determinations, the industry accused the regulator of abandoning the long-term consensus and pandering to short termism. With its decision to slash staff at Water UK, the industry is leaving itself open to the same accusation.
Source: Disconnector

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