Twenty-eighth Report Adapting Institutions to Climate Change Cm ...

Chapter 3
Water supply and wastewater treatment
3.55 Water supply and wastewater collection and treatment are undertaken by diverse utilities in the
UK: by private sector companies in England, by a company limited by guarantee in Wales, viii and
by government-owned companies in Scotland and Northern Ireland. Water companies operate
within a statutory framework which imposes a number of duties on them, e.g. to ensure that
domestic customers are provided with wholesome water. Private sector companies must also
reflect the requirements of their shareholders. Guaranteeing adequate supplies of freshwater
requires investment in reservoirs and other infrastructure, as well as in measures to encourage
efficiency of use.
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The water utilities work within well established environmental and economic regulatory frameworks
(Figure 3-V). For example, as mentioned in 3.49, the Environment Agency has prepared a water
resources strategy for England and Wales ix which sets out medium- and long-term considerations
for management. The Agency also issues consents both for the abstraction of water from rivers or
groundwater and for the discharge of wastewater back into rivers or the sea.
Water companies are subject to regulation by economic regulators – the Water Services Regulation
Authority (Ofwat) in England and Wales, the Water Industry Commission in Scotland and the
Utility Regulator in Northern Ireland. x The focus of economic regulation is to further the
interests of customers (both those of today and of tomorrow), to secure the financial sustainability
of water and sewerage services, and to contribute to sustainable development. The
emphasis has tended to be on customers and services, but there is a growing awareness of the
need to address adaptation. 51
Water resource management plans, which are now required on a statutory basis, allow each water
company in England and Wales to set out how it will meet water demand up to 2035 and deal with
factors such as changes in climate and population. Draft plans have been subject to consultation
and will be finalised in 2009 and 2010. These plans will become vital to work on adaptation
because they will include projections of current and future demand for water that are based on
climate change and other considerations such as population and household size.
A balance has to be struck between the objectives of economic and environmental regulation. In
England the Defra policy document Future Water sought to give guidance on this balance for the
current review of water pricing. 52 In Wales, the Strategic Policy Position Statement on Water sets
out the Assembly Government’s priorities on water, including affordability. 53 However, a tension
could well occur in future as the need to build in adaptation becomes more apparent, particularly
as it becomes necessary to invest now for infrastructure which may be necessary to cope with a
changed climate in decades to come.
viii The situation is in practice more complicated, since water supply areas do not match national boundaries. For
example, D ˆwr Cymru Welsh Water provides services in parts of England, and Severn Trent Water provides services
in parts of Wales.
ix There is also a separate Water Resources Strategy for Wales. See http://grdp.org/research/library/publications/40731.
aspx. Accessed 16 February 2010.
x Declaration of Interest: A member of the Commission is the Chair of the Utility Regulator for Northern Ireland.
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