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.
- Water 'grand challenge' project launches A research initiative which will see six universities collaborate on meeting the water challenges of the next 50 years has... Read More >
- Regulators praise first apprentices to graduate under new standards Ofwat and the Drinking Water Inspectorate have welcomed the four Severn Trent Water apprentices to the sector as the first... Read More >
- CMA appoints panel for Bristol Water appeal on price review The Competition and Markets Authority (CMA) has appointed a four-strong panel to consider Bristol Water's appeal against... Read More >
- Water companies and BIM: realising the potential The utilities sector has lagged behind in implementing BIM, and has yet to fully realise its potential for maintenance as... Read More >
- Innovative survey technology helps CWA pipeline project A £10M project that saw CWA add a duplication main in North Lanarkshire involved the use of PureTech's PipeDiver... Read More >
- Opinion: Collaborating will be crucial after PR19 A collaborative approach to innovation must sit at the heart of PR19 strategies, writes Tim Edwards Read More >
- Trant Engineering: Forward thinking Now positioned as a multi-discipline, innovation-focused contractor, Trant Engineering is aiming high - and says its... Read More >
- Opinion: Momentum growing on water bottle Refill campaign The national campaign to offer people the chance to refill - and reuse - their water bottles is attracting interest from... Read More >