The report homes in on the importance of reliable data to Ofwat in fulfilling its role as financial regulator of the water industry.
In particular, it notes “inherent weaknesses” in information on water demand and leakage.
The NAO suspects that the wide range of estimates for water consumption is due to inconsistencies in estimation methods. Industry figures for average water consumption vary from 122 to 177 litres per person per day, even between companies in the same region.
The disparities are important because consumption figures are used to estimate leakage from water mains. High consumption rates claimed by companies may cover up excessive leakage levels.
The NAO endorses Ofwat’s approach to controlling leaks based on balancing the cost of leakage detection and repair against the value of water saved. However, it supports the regulator’s move to update guidance on including social and environmental costs in the equation, which some companies find “challenging”.
The NAO also wants the regulator to ensure more information is provided on the cost-effectiveness of water efficiency projects in order to provide figures on water savings. Some companies currently monitor only the number of customers reached by an initiative rather than the reduction in water use.
“The regulator must work to achieve robust and reliable data on how consumers use water and on how effective water efficiency projects are in conserving water,” said NAO head Sir John Bourne.
The report notes that there are barriers to companies promoting metering. To ensure wider metering does not encourage companies to promote increased consumption, the NAO proposes a cap on revenues alongside a cap on average prices.