Price review 'will be a catalyst for innovation'
The recently concluded price review will act as a catalyst for innovation in the water industry by sharpening the focus on customer outcomes, according to Sonia Brown, Chief Regulation Officer at Ofwat.
Addressing the Water Industry Innovation Conference in Birmingham, organised by WWT on January 28, Brown said that innovation should flow from customer engagement and not be a “one-off driven by the regulator” but the result of a continual process of dialogue. She said that Ofwat were encouraged by how water companies had stepped up to the challenge of engaging more with their customers, and that she expected this dialogue to bear fruit in terms of innovative solutions in the coming years.
“The more that the customer is embedded within the culture of the water sector the more you will end up with innovation that is answering customer needs,” said Brown. “This will mean that we will see different types of innovation coming to the fore.”
The removal of the “Capex bias” in PR14 in favour of an emphasis on Totex will be a key enabler for this change. She pointed to the experience of National Grid in the energy sector as evidence that thinking in terms of Totex helps a utility to direct its investment in a smarter, more efficient way.
“Businesses in the real world don’t have different incentive pots for Capex and Opex. We hope that the move to an outcome-based approach for this price review will lead to a clearer focus on outcomes rather than particular schemes being seen as ends in themselves. This whole approach is a real step change for PR14.”
Brown said that it was very important in this shift that there was a “balance between risk and reward” for water companies, and that innovation was adequately rewarded. For this reason, the introduction of more customer-focussed outcome delivery incentives (ODIs) is crucial. Brown said that more water companies are now challenged through their ODIs to find answers to specific challenges – such as sewer flooding – and that these ODIs provided “real scope for outperformance”.
“We really hope that whereas in the past it has been suggested that the regulatory regime has been a constraint to innovation, this price review is more of a catalyst for it,” concluded Brown.
- Acoustic technology SewerBatt wins additional investment Merseyside-based business Acoustic Sensing Technology Ltd has received an additional investment of £200,000 from The North... Read More >
- Durham University and Northumbrian team up to tackle water challenges Durham University and Northumbrian Water have joined together to help tackle water- related challenges and opportunities... Read More >
- GMB wants Ofwat to investigate Severn Trent Water leakage levels Ofwat should investigate the leakage levels at Severn Trent Water. The call has come from the GMB, which claims the impact... Read More >
- Innovation Zone: Inline leak detection In the first in a new series of innovation specials, we take a look at inline leak detection - small hi-tech robotic... Read More >
- Hot stuff: making the most of sewer heat Technology now allows heat from sewage to be extracted and utilised. But what is the true potential of the innovation?... Read More >
- Vacuum sewerage networks: solutions for difficult situations When gravity sewers are unsuitable, vacuum sewerage technology can provide the answers - and with multiple added benefits Read More >
- Interview: Yorkshire Water procurement head Andy Clark Yorkshire Water's Andy Clark tells Robin Hackett why the company is making major changes to its procurement strategy Read More >
- Eco-friendly phosphorus removal: Soneco boom Amid the clamour for effective new means of phosphorus removal, Power & Water CEO Gareth Morgan discusses his... Read More >