Debate on regulation and financial stability of water companies

Water is a devolved matter, and provision and regulation take place differently across different parts of the UK.

All water companies hold an appointment as a water undertaker (or sewerage undertaker), which is subject to conditions with which the companies must comply. This is also referred to as a licence.

In England and Wales, Ofwat (the Water Services Regulation Authority) holds copies of each undertaker’s original licence and tracks any amendments.[2] As the economic regulator, Ofwat is responsible for enforcing the licence conditions.

The water industry is highly regulated. In addition to licence conditions, water companies must comply with economic, environmental, and water quality regulations. This debate pack focuses mainly on England.

Ofwat, also known as the water services regulation authority, is responsible for economic regulation of the water sector in England and Wales. It is a non-ministerial government department that is directly accountable to Parliament.

Ofwat sets the price of water through price reviews.

Water company financial stability falls under the remit of Ofwat; its statutory duties include ensuring that water companies are able to finance their duties, as well as a wider resilience objective. Ofwat oversees the financial resilience of companies and can raise concerns or challenge a company to demonstrate how its financial practices allow it to maintain long-term financial viability.

Ofwat publishes an annual report on the financial resilience of water companies. In 2023, half of the seventeen companies assessed were below the “standard” rating, with four in the most serious “action required” category.