Utility Week

UTILITY WEEK | FEBRUARY 2023 | 31 Water politicians as a stick with which to beat the sector. They had 32 mentions in the nal methodology, compared with zero in the 2019 equivalent document, highlighting the urgency with which the regulator now wants to see action taken. The message is clear that waiting for the next AMP to take action is not an option, which is consistent with what Ofwat was telling companies throughout last year. All work undertaken ahead of 2025 will put companies in a better position for PR24 and fast-track bene ts to the environment by minimising the risk of harm from…CSOs. Ofwat says all companies must meet their legal obligations and it expects them to "at least match the most ambitious com- mitments made by the leading companies". Ofwat's methodology stipulates that "where appropriate", companies should go beyond the government target of an annual average of 20 spills per over‹ ow from 2025 onwards, without additional expenditure allowances. However, where government targets demon- strably go beyond current legal require- ments, Ofwat will permit extra funding. Ofwat says it will support a step change increase in the use of nature-based solutions by robustly and extensively considering their wider societal and environmental bene ts within business plans, and introducing an environmental performance commitment oŽ ering outperformance payments for deliv- ering more for the environment. An obstacle to implementing nature- based solutions had been the operating costs of non-traditional solutions and who would pay. To address this Ofwat says it will provide a more level playing eld by setting a 10-year ongoing operational expenditure allowance for solutions that are wholly or primarily based on ongoing operating expenditure. The sector is expected to work towards net zero through ongoing activities funded through base level expenditure allowances. To go further and faster a net-zero challenge will be introduced running on a competitive basis and oŽ ering enhanced allowances to cut operational emissions. A performance commitment will be intro- duced to deliver reductions over the ve years. The sector set its own target to hit net zero by 2030, ahead of national 2050 target. There will also be a river water quality performance target intended to encourage reductions to the amount of phosphorus dis- charged at wastewater treatment sites, which Ofwat says will cover the utilisation of part- nership working, catchment management and nature-based solutions. Ruth Williams, water correspondent Comment Ruth Williams A t a time of crisis for the water sector – amid hosepipe bans, sewage scandals and growing pub- lic discontent – PR24 should have been the moment to talk positively about the future and how to right the wrongs of the past. Ofwat had an opportunity to present English and Welsh companies with a framework to tackle the growing list of com- mon challenges together. However, in its nal meth- odology the tone is not one of recalibration but of recrimina- tion. The introduction from Ofwat chief executive David Black opens with a list of fail- ures and nes and a damning verdict on customer service that "even the best in the water sec- tor fall short of service in other sectors". Ofwat could have taken this moment to paint itself as help- ing and working with the sector to make positive environmental changes, a transformational step change to a new future with big environmental improvements for customers, communities and nature. The regulator talks a lot about collaboration, but its tone in PR24 to date is not one of an industry pulling together to turn the ship around. Last year, Utility Week hosted a roundtable where regula- tory directors from water and wastewater companies were unanimous in the feeling that it was already too late for the next price review to bring about large-scale change. They expressed concerns about the Strategic Policy Statement from the Department for Food, Environment & Rural AŽ airs' on which Ofwat based its price review methodology, saying it lacked clear objectives and ambition. Ambition is also muted in the nal methodology published in December, so it looks like pre- dictions that PR24 will resemble PR19 were on the money. Angry customers, politicians and environmental groups, fuelled by media coverage, may be placated with the headline "A healthier environment and better customer services" but the methodology remains vague on crucial details. Companies must pitch their business plans without a clear picture of what cost models will look like, what performance models they will be expected to target, what the size of investment might look like, or where bills could go. Commentators warn that Ofwat's nod to "levelling the playing eld" between green and grey infrastructure projects does not go far enough. The move towards putting nature- based solutions at the centre of plans is welcome, however fears remain that in reality setting a 10-year ongoing operational expenditure allowance for such solutions, which are wholly or primarily based on ongoing operating expenditure, will not be suš cient for the life of large projects. It is of course core to regula- tion to hold the industry to account but Ofwat must remain wary of focusing too narrowly on the mistakes of the past and overlooking genuine signs of progress. So, is it too late for transfor- mation in PR24? Ofwat has set the challenge for companies to interpret the challenges as they see t in the best way for their customers and communities. This may not be the methodol- ogy some in the sector hoped for, but it is a building block towards a greener future leading on net zero and doing the right thing for billpayers, communi- ties and the environment. Is PR24 destined to repeat the mistakes of PR19? mistakes of PR19?

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