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Regulatory and policy framework

There are three main regulatory bodies that monitor the performance of water companies in England:

  • Ofwat, the economic regulator;
  • The Environment Agency, the environmental regulator; and
  • The Drinking Water Inspectorate, the drinking water quality regulator.

As part of its role as economic regulator Ofwat limits the prices that water companies can charge customers. Prices are reviewed every five years and, during the review process, water companies commit to delivering certain service levels. Performance commitments cover various areas, including customer service and environmental protection.

The Government provides policy direction to Ofwat through strategic policy statements, which set long-term priorities for the water industry. Ofwat must act in accordance with the statements when carrying out its duties, including when agreeing performance commitments with water companies.

Water companies must also comply with a range of environmental legislation and targets. For example, the Storm Overflows Discharge Reduction Plan requires water companies to eliminate the adverse environmental impact of sewage discharges by 2050.

Assessments of South West Water’s performance

Ofwat and the Environment Agency publish annual reports measuring water companies’ performance against their performance level commitments and environmental obligations.

In their most recent reports, covering performance in 2021, South West Water was rated as ‘lagging behind’ by Ofwat and received a 1-star rating from the Environment Agency. In both cases that is the regulator’s lowest performance rating.

They highlighted the number of pollution incidents as a particular area of concern. SWW was also criticised for a lack of capital investment.

As a result of Ofwat’s assessment the company will be required to pay a fine of £13.3 million in the form of lower bills for consumers.

This pack contains information on Government policy on water companies’ performance, performance measures and ratings, special performance measures, and water bills, as well as recent Parliamentary material and news items. 

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