The Environment Agency has launched a consultation on proposed changes to the water company drought plan guidelines.

The consultation will last for 6 weeks, running until 18 October 2019.

As part of a longer term strategy we are seeking views on drought plans to ensure water companies are better prepared to respond to possible droughts.

The new drought plans will be clearer, show exactly what action companies must take early and at each trigger point, and ensure companies monitor and manage demand, including leakage.

The consultation responses and separate ongoing discussions with water companies will be used to refine the guidelines. An updated version of the guidelines will be published at the end of 2019 so water companies can start preparing their drought plans in early 2020.

Paul Hickey, Deputy Director of Water Resources at the Environment Agency and Institute of Water Board Member, said:

“Prolonged dry weather and drought events could become more frequent in future with the pressures of climate change and population growth. We are seeking your views on how water companies should develop their next round of drought plans so they are properly prepared for these events.

“The Environment Agency ensures drought plans are robust and clearly set out on how water companies will maintain water supplies and uphold environmental protection.

“I encourage engagement in this consultation so that together we can help mitigate the impacts of drought on people and the environment.”

You can access the consultation documents HERE.

Water companies trying to create financial arrangements otherwise prohibited by their licence, which might include things like intercompany loans up to the parent company, will have to clearly show how the arrangements serve customers’ interests or they will be blocked by Ofwat, new guidance shows.

Water companies’ licences set out that if they want to enter into certain arrangements that are otherwise prohibited, they must get consent from Ofwat first.
Ofwat is consulting on new guidance around this process and setting out more clearly that such consent would be given only if these requests help the company to remain financially resilient and work in customers’ interests.

As an example, in the future, it is very unlikely that Ofwat would give consent for water companies to make a loan to their parent company.

This is the latest step by Ofwat in its programme of work to make sure water companies are financially resilient and act in customers’ interests.

Following Ofwat’s interventions, companies are already unwinding some such arrangements. Anglian Water has ensured the repayment of a £1.6bn intercompany loan, Southern Water has arranged the repayment of £628m of an intercompany loan, Thames Water of £250m of an intercompany loan and South Staffordshire Water the repayment of a £15m intercompany loan.

Ofwat’s Chief Executive, Rachel Fletcher, said:
“There is a clear framework in place to protect customers and their interests. Occasionally, water companies have reason to want to stretch beyond those conditions. When they do, we need to review it and consider the implications for customers.

“Today we are setting out guidance, which is very simple: we won’t allow companies to take on financial arrangements if they are not in customers’ interest and do not help the company’s financial resilience. There is a high bar for companies to clear and we want to set it out plainly for
all to see.”

Ofwat welcomes thoughts on its proposed guidance on approach by 3 September 2019. GO HERE to download the guidance and how to respond to the consultation.