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questions are raised about the legitimacy of the industry. We need to find a different way of meeting these challenges, one that contin- ues to attract investment where it is required but also one that rewards a wider range of solutions. Returning to a catchment-based approach to managing quantity and quality, in partner- ship with other stakeholders, has to be a key part of the way forward. The big challenges can no longer be solved without joined-up thinking. Water companies cannot protect their customers from flooding if sewerage systems are overwhelmed by over- topping rivers; environmental bet- terment cannot be achieved solely by investing in sewage treatment works or storm overflows. The unprecedented rainfall across many parts of the UK over the recent weeks and the extensive flooding highlights the importance of managing total catchments. No amount of dredging or pumping will provide a complete solution. We need to control flows in the higher reaches of catchments, to promote practices that hold back water rather than accelerating its passage down the catchment. The new model for the industry must be as a services business that only creates assets when essential to deliver services. It must be one that offers a range of solutions, including collaborative catch- ment management and incentives to change behaviours so that we achieve the most cost-effective solutions. We are already seeing a slow, but encour- aging, emergence of these changes across a number of areas; financial incentives to farmers to protect water quality for a frac- tion of the cost of building new treatment assets; incentives for customers to use water wisely so reducing the need to develop new resources; reducing surface water run-off from urban areas by incentivising sustain- able drainage options – all welcome devel- 6 | 14th - 20th February 2014 | utILIty WeeK Comment O n 1 April it will be 40 years since regional water authorities were formed, bringing together activities previously carried out by central and local government. The vision was to provide catchment-based management of all aspects of water from source to sea, so enabling a holistic approach that would balance com- peting interests and allow the most cost- effective way of resolving problems within a catchment. This model was considered to be ground- breaking, but it failed to deliver because of lack of investment. Government could never find the cash needed to improve quality and service against the competing demands of education, social services, transport, etc. The growing pressure of new EU direc- tives, together with a government wed- ded to private sector solutions, finally led to a decision that the water authorities should be privatised, minus their regulatory functions. Privatisation in 1989, although very unpopular at the time, has proved to be very successful at delivering investment – more than £110 billion of investment, facilitated by a stable regulatory regime and resulting in major improvements in quality and ser- vice and bills on average £100 per annum less than they would have been in the public sector. The initial thinking was that there needed to be around ten years of sustained invest- ment to raise standards, aer which there would be a lower level of steady investment to improve infrastructure. In practice, the requirements for higher quality standards and better service, cou- pled with the mammoth task of fixing exist- ing infrastructure, has meant continuing demands for high levels of investment. Over- lay this with the impact of changing weather patterns and we have the prospect of high levels of infrastructure investment for the foreseeable future. Clearly something has to change – we cannot simply build our way out of these problems. Customers are already feeling the strain of increasing bills and as a result, Back to a catchments future The industry needs to transform the water business from one that largely focuses on earning a return from building assets to a new dynamic model that delivers service through imaginative solutions Chief executive's view Colin Skellett, Wessex Water opments that will provide more sustainable and cost-effective solutions. These approaches are less certain than the traditional ones of building more assets and so need to carry an appropriate level of return, but even with a higher level of return, the overall impact will be lower bills for cus- tomers. This new model will only succeed if companies are incentivised to develop the higher risk solutions because these will deliver appropriate levels of profit for the risk involved. So what might the future look like? A customer-focused retail business driving standards that customers want and are willing to pay for. A wholesale business that does not automatically assume the solu- tion is to build new assets, that explores the options of doing things differently through trad- ing or other delivery mecha- nisms before it considers asset solutions. Although this model will deliver more cost-effective solu- tions, the lower levels of cer- tainty will provide a challenge for regulators as the range of solu- tions becomes more diverse and businesses change the way they operate. Regulators will have to concentrate more on overall out- comes and customer satisfaction rather than detailed measurement of individual components. It is also important to note that many of these services do not need to be delivered by water compa- nies, so the opportunity for new entrants is enhanced. The Water Bill gives a strong sense of direction and the new approach from Ofwat encourages companies to set out plans to transform the water business from one that focuses on largely earning a return from building assets to a new dynamic model that focuses on delivering service through imagi- native solutions. It is now up to the industry to respond. "The new model for the industry must be as a services business that only creates assets when essential to deliver services"