Overhaul ‘fragmented and inefficient’ water sector regulation, says water firm

The current approach to environmental regulation of the water sector should be dumped in favour of ‘outcome-based regulation’ incorporating market mechanisms, a water firm has said.

Wessex Water says outcome-based regulation would give companies “the opportunity to make greater environmental improvements using markets – with the aim of driving investment in the private sector so the financial burden is not passed on to bill payers”.

It claims the existing system of rules forces firms to spend large sums on upgrading water treatment works leading to “marginal gains” in water quality when cheaper catchment solutions could be more effective. 

The water firm gives the example of Poole Harbour, which suffers from nitrate pollution. Wessex Water said it was “obliged to reduce nitrate pollution at Poole Harbour through investing in a carbon-intensive treatment process, with an estimated cost of £31,000 per tonne of nitrogen removed” but that it could “achieve the same outcome by delivering a nature-based solution in partnership with farmers, at a cost of £9,000 per tonne of nitrogen removed – i.e. 71% cheaper and also with biodiversity benefits instead of more carbon emissions”.

A new outcome-based approach would involve setting higher level objectives than company actions and would replace the “thousand of rows of detailed actions in the Water Industry National Action Programme (WINEP)”. 

Work to achieve the targets could be delivered by other sectors and markets could be used to help facilitate this, says the water firm.   

Wessex Water’s group director of environmental futures Guy Thompson said: “As a highly regulated sector, there is an opportunity to use the water industry as a testbed for a different approach and accelerate delivery of the 25-Year Environment Plan on the ground.

 “We have an opportunity to do this now. If we wait for another regulatory cycle to pass us by because of indecision, fear of risk or politicking we will be 11 years through the plan before anything happens.

“This requires a leap of faith to take the national targets and turn them into a system of incentives and obligations on the private sector that will drive private investment. Not permits to pollute or offset harm but mechanisms to drive positive change.”

But not everyone agrees. Rivers campaigner Ash Smith from Windrush Against Sewage Pollution said outcome-based solutions "always sound smart and ambitious but the reality is that the industry has been using the complexities of outcomes, causes and effects and cost analysis to dodge investment for years and has become a master of this territory alongside the complicit Environment Agency which needs to show success and is happy to help bend the reality to do so".

Smith added: "I like the fact that the industry is thinking about change as the regulators are still staring into the headlights but why on earth would anyone take the profit-hungry monopolies' suggestions of how they are going to solve the environmental catastrophe they benefit so much from causing?

"An independent investigation is long overdue to root out what went wrong, who is behind it and to identify a system that will not fall victim to the same predators."



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