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  • Richard

Ofwat bites!

There has been a lot of angst in the UK press in the past few months about the drought and about sewer overflows .... the press usually not understanding how the regulatory system works. Though with exceptions, that the Windrush Against Sewage Pollution (WASP) campaign has uncovered where the private companies may have been discharging untreated sewage from treatment works when there have been no abnormal rainfall events.

But that is the context for Ofwat's recent confirmation of the £150m to come off customers' bills as penalties for missing their 'Outcome Delivery Incentives' targets - which include penalties for underperforming as well as incentives for outperforming.

Good - it is how incentive-based regulation of monopoly public service providers is meant to work.

The next challenge is how to explain to customers that their desire to 'remove all storm overflows', costed at approx £56 billion, will be funded by customers themselves through much higher water bills - the private companies are simply contractors carrying out the regulator's instructions at a 'fixed price' to undertake the work. Penalties and incentives to keep these contractors performing.

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