Changing climate prompts Ofwat review

The government has today announced a full review of the water regulator Ofwat designed to ensure the watchdog is fit for future challenges, such as those presented by climate change.

"Ofwat has been successful in holding down household bills while water companies invest in their infrastructure," said environment secretary Caroline Spelman. "But we need to make sure the regulator is in good shape to help the industry prepare for a changing climate and a growing population, at the same time as keeping bills affordable."

Defra has appointed David Gray, the former managing director of energy industry watchdog Ofgem, to undertake the review, which is due to be completed early next year.

The review team will seek comments on Ofwat's current role and performance from customers, water companies and investors and is expected to address whether the watchdog plays a sufficient role in preparing the UK's water infrastructure for the increased flood and drought risks associated with climate change.

The review comes at a crucial time for Ofwat as it prepares to deliver a major white paper next summer that will set out its future policies for water management.

The regulator has attracted fierce criticism from water companies over the past year who have accused it of jeopardising essential infrastructure investment programmes designed to make the UK more resilient to climate change by rejecting requests for price hikes.

Earlier this year, Severn Trent issued a major report warning that the UK water industry was currently " unsustainable" and required £96bn of investment over the next 20 years to make much needed infrastructure improvements and prepare for rising climate change risks.

A spokesman for Defra said that the review had not been sparked by any concerns about Ofwat's recent performance and was instead intended as a 20-year health check. "The water industry has changed considerably since Ofwat was set up, not least in terms of the future challenges it faces such as climate change, " he said. "The review is intended to ensure the regulator is fit to address these challenges."