CCW submission to the Independent Water Commission

The UK Government (in England) and Welsh Government (in Wales) should take overall responsibility for what outcomes to prioritise from the water system.

They should give clear direction to the regulators on what the priorities are. It is not clear that this is happening at the moment. For example, Defra produced the 2023 Plan for Water. This contains a per capita consumption target of 110 litres per person per day by 2050. It’s not clear who is accountable for achieving this target.

The Plan for Water also includes a 2050 reduction target of 15% for the non-household market. Again, it’s not clear who is leading that or in charge of delivery.

CCW wants to see a clear expectation from UK Government in England for water companies and retailers to collaborate to help businesses save water. Under the current regulatory framework, there is no incentive to deliver this collaboratively. It is important to make this a requirement for retailers as well as water companies. CCW would like both English and Welsh governments to properly take into account water bill payers’ and the public’s views on what the priorities for the sector should be, and clearly demonstrate how this has been done.

Defra and Welsh Government should clearly define the roles and responsibilities of the regulators to properly empower them, and resource them to do that actual job. Each of the regulators should focus on its own remit and deliver that really well. 

The government must adopt “polluter pays”. Public perception of the water industry is low. Water companies are often the last organisation to “touch” water. It is too easy to blame them, and charge them – and therefore their customers – for cleaning up pollution. This means responsibility and costs are not properly attributed and water customers are unfairly – and unknowingly – charged. The revised EU Drinking Water Directive will require pharmaceutical companies to pay for the removal of pollutants they produce. This should apply in the UK. Highway drainage must not come out of water bills.

WFD targets, objectives and deadlines will need to go beyond 2027 as those targets have been missed in England and Wales. CCW’s research shows a high level of support for improving ecological status of water bodies, with priority given to nature recovery over amenity value. Any change in spatial planning or indeed strategic oversight must consider how River Basin Management Plans would be impacted. 

Environmental water quality and pollution is a cross-border issue, so strategic coordination across English and Welsh administrations is important. The Commission report mentions the Interim Environmental Protection Assessor for Wales’ call for evidence on water quality legislation review. In our response, CCW highlighted the importance of better clarity and transparency on different legislative and policy approaches to achieve better water quality. Understanding the rationale behind different approaches between England and Wales, and how these still deliver the good water quality water consumers want, could help enhance trust in the sector. One example of this is clarity on the different regulatory approaches in storm overflow impact mitigation between England and Wales. 

Given the high profile of pollution and storm overflow spills, the public must be reassured that progress is being made, particularly given the increase in bills following PR24. CCW has concerns about how the statutory investment programmes in England and Wales plan to tackle storm overflows.  

A storm overflow could be spilling frequently, but not causing as much environmental harm as another spill in a different location where the spill gets more diluted. So to focus only on the number of spills will not fully address the problem. CCW knows that customers want the environmental health of their rivers to improve. Ofwat should ensure that water companies prioritise the most harmful and higher-risk storm overflows. All water companies must gather enough data to be able to do this.  

According to Ofwat’s PR24 final determinations: Expenditure allowances (pdf), in AMP8, water companies will spend £651 million on continuous water quality monitors and £27 million for event duration monitors. Yet the information these monitors will provide is of limited use. They only measure levels of dissolved oxygen, temperature and pH values, turbidity and levels of ammonia. They do not measure, for example, metals such as from highway drainage. These monitors may show high levels, but that pollution may not actually be coming from an overflow or treatment works. Other sectors, for example the Met Office, use technology much more expertly to model the results of an action or incident. 

The UK Government (in England) and Welsh Government (in Wales) should take overall responsibility for what outcomes to prioritise from the water system. They should give clear direction to the regulators on what the priorities are.  

It is not clear that this is happening at the moment. For example, Defra produced the 2023 Plan for Water. This contains a per capita consumption target of 110 litres per person per day by 2050. But no organisation is delivering against this target.  

The Plan for Water also includes a 2050 reduction target of 15% for the non-household market. Again, it’s not clear who is leading that or in charge of delivery.  

The Water Strategy for Wales was published in 2015 and needs an update. It has been four years since the Welsh Government completed a review process with extensive stakeholder engagement (June 2021). The review pointed out the importance of an updated, action-focussed document, strategically aligning with cross-border issues (such as water quality and water resources management).  

CCW would also like to see other important updates in Wales: 

• an updated position on eradicating water poverty 
• a strategic water resources management framework for Wales, including a review of the definition of a water-stressed area that triggers demand management action and a review of metering/smart metering and demand management policies 
• action on highway drainage and pollutants 
• reviewing private water supply/pipes ownership and policy to address leakage and drinking water quality issues

CCW wants to see a clear expectation from the UK Government in England for water companies and retailers to collaborate to help businesses save water. Under the current regulatory framework, there is no incentive to deliver this collaboratively. It is important to make this a requirement for retailers as well as water companies.

CCW would like both UK and Welsh governments to properly take into account water bill payers’ and the public’s views on what the priorities for the sector should be – and clearly demonstrate how this has been done.

The organisations that set the high-level statutory and regulatory frameworks that go into a price review (eg WINEP, WRMP, NEP and NRW) should coordinate these plans better with the price review process.  

In between Ofwat’s draft determinations (in July 2024) and its final determinations (December 2024), the Environment Agency added significant-value WINEP schemes into PR24. In Wales, the details of the NEP and its delivery were also updated at the last minute after Natural Resources Wales’ storm overflow classification guidance change.  

CCW does understand that these items are statutory obligations. But because of these late additions, customers’ actual bills went up in April 2025 by quite a lot more than was visible to them at draft determinations. This shows a lack of transparency, as well as a lack of understanding of the impact of the final costs on customers.  

This lack of co-ordination means that costly projects are being loaded into the price review process without due scrutiny and challenge from the people – customers – who are paying for them.  

Welsh Government should retain the Wales Price Review Forum. It should enhance the terms of the Forum to encourage greater stakeholder collaboration on identifying issues and solutions, and a stronger requirement for the Forum to look at customer evidence so that informs its recommendations to companies and regulators.  

A more customer-focussed Wales Price Review Forum leading up to PR29 would help ensure that business plans and price determination decisions are influenced by evidence of customers’ views.  

Any strategic steers coming out of the forum should be specific and action focussed – suggesting meaningful changes to the proposals already discussed collaboratively at the forum. Long-term strategic plans that underpin five-year business plans should not be re-written every five years.  

Water companies and other organisations should set a long-term plan and then revisit it at five-yearly price reviews to see what external factors (political, economic etc) have changed and change the plan accordingly. Five-year price controls should be set in the context of long-term strategies. If long-term plans are robust, this could reduce the regulatory burden and reduces the risk of short termism. Ofwat’s introduction of adaptive planning at PR24 has mitigated this to a degree. 

CCW is concerned that the agility of the business retail market is constrained by water industry regulation. In order for any change to be made to how the competitive market functions under the market codes (the Market Arrangements Code and Wholesale Retail Code), this must go through a lengthy process and final approval by Ofwat.  

Whilst improvements were made to the code change process in December 2023, enabling greater focus on changes that will benefit customers, the process still takes too long from end-to-end. This delays important changes from progressing swiftly. 

An imbalance of resource between organisations can lead to duplication, confusion and the wrong allocation of resources that come out of public money. For example, despite the existence and statutory remit of CCW, Ofwat does research on customer views.  

We estimate Ofwat spent over £800,000 on research in 2024-25. CCW’s entire budget in 2024-25 was £7 million. CCW should be the first port of call for all customer research. Duplication also means billpayers are in danger of paying twice. They pay for CCW via the levy on water bills. Then on top of that, Ofwat is funded by licence fees collected by water companies – which is ultimately also paid for by billpayers.  

On customer casework, Ofwat should stick to its statutory remits eg new connection charges; transfer of private sewers; bulk pricing etc. Customers should be able to understand a simple, clear path to the right organisation for handling their complaint. 

CCW understands that Ofwat is a non-ministerial department and is therefore independent of Defra. However, this can lead to the customer voice getting lost if Ofwat rejects important changes that can deliver customer benefit.  

There is no escalation process or right of appeal for customers against Ofwat decisions. Water companies can appeal to the CMA, but if Ofwat makes a decision that goes against customers’ interests, there is no way to challenge that.  

In the non-household market, Ofwat is required to approve market code changes before they can be implemented. This can further delay important changes from happening. As well as making a determination on changes to the Market Arrangements Code and Wholesale Retail Code, Ofwat is the custodian of the Customer Protection Code of Practice (CPCoP). This is the code that sets out the way retailers must interact with their customers around billing, complaints, the switching process and sales and marketing activities.  

CCW has formally submitted two CPCoP change requests in the past three years. One change request to provide greater protection for customer credit was submitted to Ofwat in August 2022. This was not consulted on until July 2024, almost two years on.  

CCW has called for Ofwat to commit to an end-to-end process of six months for CPCoP changes but this has not happened. We want to see this revisited and a swift and efficient process put in place. 

Balancing customer affordability with the need for robust infrastructure resilience is a central challenge in the price review process. Price reviews need to be both forward-looking and risk-based, ensuring that short-term bill affordability does not compromise long-term service reliability and environmental sustainability.  

Asset resilience targets and related performance commitment metrics should be set over a long (20 year+) period, based on evidence on asset health and built around a long-term outcome and milestones. Periodic reviews will only need to change this strategy if compelling, material new evidence justifies it. This approach can be driven by a more robust regulatory incentive regime so if companies invest to upgrade ageing networks, they are rewarded with a degree of cost allowance if they go ‘above and beyond’ the performance commitments and asset resilience targets. Conversely, companies falling short can face penalties and lower cost allowances, building on Ofwat’s current ODIs and Price Control Deliverables. 

Regulators need companies to provide more detailed and robust asset health data to assess the potential risks and impacts of infrastructure failure, from service disruption to environmental damage.  

CCW supports Ofwat’s work in 2025-30 to gather more detailed asset health data. By quantifying these risks, the review process can allocate funding more efficiently and set long-term strategic targets and performance commitments more accurately. Investments in infrastructure resilience might have higher upfront costs but can reduce the overall risk and long-term costs associated with major failures or environmental disasters. This trade-off, while potentially raising short-term bills, ultimately protects customers by preventing costly, system-wide failures.  

Providing clear evidence and examples of how resilience investments lead to fewer outages, reduced environmental incidents and lower long-term costs can justify any necessary short-term increases in bills. To increase trust in the sector, water companies should engage their customers on these issues, with regulators having a duty to take account of customer opinion in setting the pace of delivery and the trade-offs between what customers pay in the short and long term.  

Companies and regulators need to commit to transparency so stakeholders such as CCW have an opportunity to challenge and influence these decisions.  

A dynamic review process that revisits resilience targets and cost allowances every few years ensures that policies remain aligned with both technological advances and emerging challenges. This can involve benchmarking against international best practice or incorporating insights from pilot projects and industry research. 

CCW would like to see changes to the price review process which would enable the water industry to deliver positive outcomes, while ensuring long‐term sustainability and improved customer service.  

Linking performance directly to cost allowances can motivate water companies to achieve efficiency targets and improvements in customer service, environmental performance and infrastructure resilience.  

Stronger incentives to expand current customer experience-based metrics would improve customer satisfaction and trust, increase service provision standards and reduce high customer complaint volumes.  

As the customer experience crosses billing and operational activities, a higher value incentive would motivate company boards to develop a stronger customer-focused working culture.  

As mentioned previously, an improved risk-based assessment would help more accurately allocate funding towards preventing and mitigating future challenges. A model that adjusts allowances based on anticipated risks – such as climate change impacts or aging infrastructure – would encourage companies to invest in proactive measures.  

Given rapid technological and environmental changes, CCW thinks the price review process should incorporate regular updates and flexibility.  

Interim assessments of long-term strategic outcomes, milestones and targets could allow for adjustments based on emerging trends and unexpected challenges, ensuring that regulatory frameworks remain fit for purpose. This adaptive approach would help water companies react quickly in response to new risks or opportunities.  

CCW wants to see improvements in the clarity of how decisions are made showing the input of consumers, environmental groups and industry experts. This would enhance trust and lead to better-informed decisions. When stakeholders understand and support the rationale behind cost allowances and the direct links between investments and customer outcomes, there is a stronger mandate for the necessary investments, even if they might initially result in higher bills.  

Meaningful engagement with customers and the people and communities served by the companies would produce evidence to inform service delivery targets, and the trade-offs between affordability and improvements services/environment in the short and long term. This would increase public trust in the sector. It needs an addition to the range of statutory duties to clearly show that the regulator needs to show how evidence of customers’ views underpins its decisions. Establishing a regulatory environment that encourages long-term strategic investment rather than short-term cost-cutting would help the industry secure positive outcomes.  

Our earlier response explains how price reviews based on long-term strategic outcomes and milestones, informed by evidence from customer engagement, can achieve this. This should create a more predictable and stable regulatory environment that should encourage the long-term investment needed to address the challenges ahead. 

Changes to the price review process for assessing and setting enhancement expenditure could better support infrastructure improvements by encouraging strategic, forward-looking investments that go beyond basic maintenance.  

Here are several improvements CCW wants to see:  

• Enhancement expenditure should be directly tied to measurable performance improvements. By establishing clear performance metrics set over the long term (such as for reduced leakage, improved bathing/river water quality or enhanced resilience to climate change), companies can justify higher spending on infrastructure upgrades. Ofwat’s Outcome Delivery Incentives (ODIs) could motivate companies to achieve such targets. 
• The regulatory framework should encourage long-term strategic planning by allowing multi-year enhancement expenditure commitments, as detailed in CCW’s earlier response. This would help water companies spread the cost of major upgrades over several years, reducing the immediate financial impact on customers. For example, enabling companies to submit multi-year improvement plans for regulatory approval can incentivise investments in large-scale projects such as network overhauls or the integration of renewable energy sources into treatment processes.  
• Enhanced consultation with customers and stakeholders (including environmental groups and industry experts) can build trust and ensure that enhancement expenditure is directed towards projects with clear public benefits.  

Transparent reporting on how these investments deliver improved outcomes – such as enhanced service reliability or environmental protection – will help justify the associated costs. By implementing these changes, the price review process could better align enhancement expenditure with long-term infrastructure improvements. This would not only support sustainable investment in critical assets but also ensure that the water industry remains responsive to emerging challenges and opportunities, ultimately delivering tangible benefits to customers and the environment. 

In the past, we have seen unforeseen changes in inflation, interest rates and other factors lead to water companies raising capital at a significantly lower cost than assumed by Ofwat. These windfalls are paid for by customers. 

Regulation requires a protection mechanism that ensures companies and their investors receive a reasonable return, but the benefits of unforeseen windfalls from lower than forecast financing costs are shared with customers. This could take the form of an outperformance sharing mechanism that delivers additional investment, a ‘return’ to customers or increases in affordability support, or regulators could consider a ‘cap’ on returns to prevent excessive windfalls. 

Changes to the price review process on performance incentives could further secure infrastructure delivery by aligning financial rewards with outcomes that matter most to customers, the environment, and public health.  

CCW would like to see:  

Improving the specificity and relevance of ODI metrics can drive targeted improvements in infrastructure delivery. Eg a new metric based on the percentage of infrastructure meeting modern resilience standards would allow companies to focus their efforts on outcomes that directly impact service reliability and increase public transparency and accountability.  

We want to see stronger and higher value customer experience incentives introduced to more effectively motivate companies to reduce customer complaints and foster a more customer-focused working culture. 

The regulator should evolve environmental performance metrics towards more accurate measures of harm. As more robust data becomes available, targets can be based on the harm caused by storm overflows, not just the volume of spills. 

Regulators should make it a duty for companies to demonstrate that they are addressing the needs of the worst-served or most at-risk customers when pursuing performance targets. eg. companies should prioritise customers who experience the worst and/or more frequent disruptions in sewer flooding incidents, rather than be inadvertently incentivised to deal with lower impact and easier/cheaper to solve issues first.  

Incentives should reward companies for strategic, long-term investments in infrastructure that deliver sustainable benefits rather than short-term fixes. eg. structuring incentives around multi-year performance benchmarks or phased project delivery can encourage water companies to plan and execute comprehensive infrastructure upgrades.  

CCW welcomed the introduction of Price Control Deliverables (PCDs) at PR24 to facilitate greater transparency, accountability and to more strongly incentivise the timely delivery of capital investment. In the future, a more tiered incentive structure could be introduced to reward best-in-class performance in delivering PCDs. Under such a structure, companies achieving excellence in infrastructure delivery and customer outcomes could receive higher rewards, while those meeting only basic requirements would receive a lower incentive. This would motivate continuous improvement and raise the benchmark for all companies.  

Different regions and asset types may face unique challenges, so a one-size-fits-all approach might not be effective. Introducing flexibility into the incentive framework by allowing for regional or asset-specific adjustments can ensure that performance targets are both challenging and achievable.  

Transparency in how performance incentives are set and measured builds trust among consumers, investors, and environmental groups. Enhanced customer stakeholder engagement will ensure that the incentive framework remains aligned with evolving expectations. 

CCW supports the installation of smart meters for customers, particularly for business customers. Sharing the data from smart meters in a clear and understandable way will help customers to be billed accurately, understand the water they are using and make informed decisions about water savings. 

Natural Resources Wales and the Welsh Government should review their demand management and metering/smart metering policy frameworks for more effective water and demand management. In England, compulsory metering follows the classification of areas as water stressed. In Wales, there are no water-stressed areas.  

However, there are areas in Wales that are predicted to be in water deficit; areas that have high season variability of water availability because of tourism; areas in which action should be taken before water is adversely affected at times of developing drought; and urban areas where water service provision would benefit from high demand management (supply re/asset resilience and connectivity vulnerable to climate change challenges).  

A new framework and triggers are required for reviewing metering policy and demand management in Wales that are not limited to the definition of an area as water stressed. Reviewing this and metering policy in Wales has been on the Welsh Government agenda since the publication of its Water Strategy for Wales in 2015. It is long overdue. 

In April 2020, Ofwat introduced C-MeX – a financial and reputational incentive mechanism designed to provide customers in the water sector with excellent levels of service. Companies receive a score based on the satisfaction ratings given by customers in monthly surveys. Each company can receive outperformance payments, or incur underperformance payments, based on how its scores compared to other companies.  

When it comes to complaints, CCW would rather customers didn’t have to make them at all and we think companies should therefore be financially incentivised to reduce them. High volumes of complaints are evidence of a poor experience for many customers and can be an indicator of more fundamental problems. 

We want to see an additional metric put into C-MeX that measures customer complaint volumes (per 10,000 connections). That measure should make up 25% of the value of C-MeX. If Ofwat believes that “providing an excellent customer experience for customers is fundamental for maintaining trust and confidence in the water sector,” it must provide financial incentives for water companies to do that right from the start. 

Alternatively, volume of complaints (per 10,000) could be introduced as a standalone incentive. 

• Introduce a single social tariff for England and Wales 
• Ensure a proactive approach by water companies in identifying customers eligible for additional support 

It is important that Ofwat revisits the credit protections currently in place through the Customer Protection Code of Practice. While some protections are required, particularly around communicating with businesses with credit on their account, these do not go far enough. As at March 2024, retailers were holding on to £127 million of non-household customers’ credit in closed accounts and £115 million in live accounts. CCW wants customers to receive credit refunds automatically on an annual basis where they pay by direct debit. This will reduce the risk of businesses losing money that is rightfully theirs.  

Low water-use businesses that have not engaged in the business retail market are on a default tariff that protects them by capping their bills. The default tariff is set under the Retail Exit Code by Ofwat. These customers are referred to as Group 1 in the code. Ofwat has committed to review price protections applying to business customers from Quarter 1 2025-26. Necessary price protections must not be removed merely to stimulate competition. 

For better outcomes for customers and the environment, CCW thinks a combination of measures would be most effective:  

• Changes to the price review process to increase financial resilience. CCW’s suggestions on improvements to the price review process, set out in our responses to previous questions, would help companies increase their financial resilience because investment decisions, cost allowances and performance targets/incentives would be set in a longer-term strategic context, giving companies and investors greater long-term certainty which may reduce risk. 
• Changes to the oversight of water company debt/company financial performance in general. CCW thinks shifting to more supervisory financial oversight could help regulators detect potential issues before they impact service delivery and help avoid the excessive dividends and poor performance seen in the past. A more proactive approach to oversight may help regulators prevent situations where cost-cutting or excessive debt levels lead to underinvestment in environmental safeguards and customer service improvements.  
• Changes to the way in-distress companies are managed. CCW thinks tighter oversight of water company debt or improved management of companies in distress would ensure that financial practices do not compromise the ability to invest in environmental projects or maintain affordable service levels. By keeping companies financially healthy, there’s a better chance they can commit resources to both customer service and environmental management. 

Overall, while no single change is a silver bullet, integrating these measures should create a more balanced and sustainable regulatory framework. Such a framework would not only strengthen the financial foundations of the industry but also help promote outcomes that are beneficial for both customers and the environment. 

Since privatisation in 1989, water companies have increasingly relied on debt to fund infrastructure investments. 

• Pages 32-33 of the House of Commons library research briefing Economic Regulation of the Water Industry (pdf) highlights how gearing (debt-to-equity ratio) has risen.  
• Debt levels impact the financial stability measured by credit ratings (see pages 13-14 of Ofwat’s 2023-24 Monitoring Financial Resilience Report (pdf)) and future investment capacity if investors perceive high debt as risky.  
• Regulatory reviews and parliamentary inquiries reveal that financial strategies in England and Wales have often prioritised debt servicing and dividends over reinvestment in infrastructure. 

There are several sources of evidence to illustrate these issues: Ofwat’s Monitoring Financial Resilience Reports.  

Since 2017, Ofwat has documented cases where water companies, despite increasing debt, paid substantial dividends. The 2015-16 report shows dividends exceeding Ofwat’s expectations, with profits directed to investors rather than reinvestment. In 2021-22, Northumbrian Water and Portsmouth Water reported dividend yields of 10% or higher, without adequately justifying how these payments aligned with service delivery, raising concerns about reinvestment sufficiency. 

Parliamentary reports – The House of Lords Industry and Regulators Committee (Chapter 7) found that between 2010 and 2021, English water companies paid £18.9 billion in dividends – £1.6 billion annually. This substantial outflow has raised concerns over whether sufficient funds were allocated to maintaining and upgrading infrastructure.  

Academic studies – Bayes Business School’s study, The Demand for Dividends: The Case of UK Water Companies, suggests that persistent borrowing has been used to finance both dividends and infrastructure, highlighting a tension between shareholder rewards and network reinvestment.  

The commission’s review can determine whether past financial decisions aligned with long-term public interest and infrastructure sustainability. It should assess whether dividend policies and debt levels affected service quality or delayed necessary upgrades.  

Ofwat has long emphasised that water companies must balance infrastructure investment with fair shareholder returns. A review would clarify whether historical spending patterns met regulatory expectations. 

Ultimately, the commission’s review should establish a better balance between debt financing, dividend distributions and reinvestment, ensuring future infrastructure improvements and service reliability for consumers. 

Water companies have pleaded poverty many times but still managed to deliver their business plans and make tidy profits along the way.  

Water UK often quotes 2% as the return for investors in the regulated water industry in England and Wales. But this is the return on regulated equity. That’s just one metric. 

Another common metric used when talking to investors is total market return – which is over 8% for water companies in the 2020-25 regulatory period.  

In 2019, Citizens Advice estimated that between 2005 and 2019, Ofwat allowed water customers in England and Wales to be overcharged by £13 billion. The report echoed concerns CCW had raised throughout the last decade that the regulator had been overgenerous to companies on financing costs. 

Competition can play an important role in bringing clear benefits for customers, eg water efficiency and innovative services. However, CCW wants to see the competition that already exists – in the non-household market in England – working properly before any further competition is encouraged.  

We want to see the market deliver benefits to businesses of all sizes before this is considered. Where we want to see changes through regulation are greater powers for Ofwat to require retailers to provide a supplier of last resort function, as currently retailer opt-in only. This will ensure all businesses have a backstop retailer should their current retailer suddenly exit the market. This is currently a gap in the market which leaves businesses vulnerable.  

CCW wants to see a change in primary legislation to remove temporary building supplies from the competitive market in England and Wales. These temporary supplies are used by developers to build new premises, before a permanent water connection is made. Currently developers are billed by a retailer, regardless of whether the end purpose of the premises being built are domestic. This can cause ineligible premises to remain in the businesses retail market in error, and results in a poor experience for customers. We want to see premises enter the market as an eligible businesses premises at the point a permanent connection is made.

CCW wants to see changes to both the business retail market and the charges that apply to the market to drive greater water efficiency.  

Evidence shows the experiences of businesses in the market differs by business size. Larger businesses, using more than 50Ml of water a year, are more aware of their ability to switch retailer, are more active in their choices and experience the benefits of consolidated bills, where they have multiple sites across England.  

Based on evidence from the first five years of the market opening in England, CCW identified notable differences for micro-businesses that use low volumes of water (using up to 0.5Ml of water a year) compared to businesses of other sizes. Generally, these customers were still not experiencing the wider benefits that a competitive market can deliver, nor were they aware of or engaging with the market.  

In our Five-Year Review of evidence from complaints, research into the views of businesses and talking directly to them, CCW advised that we expect the number of switches by micro-businesses to increase by 10 percentage points from April 2023 to April 2025 and contract re-negotiation to increase by 5 percentage points over the same period. It is important that the market delivers price and service benefits for businesses of all sizes, and we expect to see this evidenced in market activity and engagement, satisfaction levels and benefits being received, particularly as we enter the eighth year since the market opened.  

CCW has commissioned CEPA to analyse all relevant data and produce an independent synthesis report which we will use, as well as additional evidence, to base our decision on whether these customers are truly benefiting.  

CCW also wants to see more innovative tariffs to help businesses save water and money. With the increasing demand on our water resources, it is important that trials happen to understand what works for customers and the environment. Just one water company – South West Water – is doing a tariff trial for business customers in 2024-25. It is working with the relevant retailers to communicate the change and its impact. We want to see more of this, coupled with support for businesses to help them understand the impact of the trial on their usage and bills.  

These issues should be a priority in Wales, where the market is open to a limited number of high-consumption business customers. The majority of business customers served in Wales are micro businesses. The exploration of innovative and enhanced support would inform service improvements in the Welsh market too. 

Environmental legislation does need to be kept under review. In CCW’s joint research with Ofwat (Customer Spotlight 2024), less than a quarter (23%) of respondents said they trust water providers to do what’s right for the environment. That’s down from 31% in 2021. From that, it would seem logical that people want to see more inspections done by the Environment Agency, rather than leaving water companies to self report.  

There are issues with current regulatory requirements. For example, a storm overflow could be spilling frequently, but not causing as much environmental harm as another spill in a different location where the spill gets more diluted. So to focus only on the number of spills will not fully address the problem. CCW knows that customers want the environmental health of their rivers to improve. Ofwat should ensure that water companies prioritise the most harmful and higher-risk storm overflows. All water companies must gather enough data to be able to do this.  

The regulator should evolve current environmental performance metrics towards more accurate measures of the harm caused by company activities. For example, as more robust data becomes available, targets can be based on the harm caused by storm overflows, not just the volume of spills. This will better incentivise prioritisation of solutions to address the worst problems.  

Wales should mandate EDMs on all types of overflows, as they are in England. Although they are not mandatory in Wales, all overflows in Wales are EDM monitored. Mandating it would futureproof any future changes in water company policy.  

CCW is aware that the Interim Environmental Protection Assessor in Wales is reviewing environmental legislation on water quality to consider changes required in Wales. In addition, the Office for Environmental Protection is reviewing failure to comply with WFD at government and environmental regulator level.  

Both these processes could result in suggestions for change in legislation and process. It is important to consider how these processes align with other environmental and regulatory requirements that affect water quality, water and wastewater service regulation. 

In order to achieve the non-household water efficiency target in England set by Defra, CCW believes a change in regulatory responsibility may be required. Currently water companies have the target and funds through ODIs to reduce water demand by businesses, yet they do not have the direct customer relationship. This sits with the retailer. 

CCW wants to see greater collaborative working between water companies and retailers to help businesses save water. However, under the current regulatory framework, there is no incentive to deliver this collaboratively. It is important to make this a requirement for retailers as well as water companies.  

Wales should also have a national framework for water resources management in the same way that England does. This would help inform decisions on water resources management and water company plans as it would consider the wider national, economic and ecological needs for water supply (including private and public supplies). 

CCW believes more should be done to encourage, incentivise or mandate the use of non-potable water in business where appropriate. In Eddington in Cambridgeshire, the sustainable drainage network captures surface water for use in the non-potable network. By using rainwater, the need for drinking water has been reduced from 144 to 80 litres per person per day. 

Innovation should help companies move from “find and fix” to “plan and prevent”. At the moment, the first that a water company knows that something is wrong is frequently because they hear it from a customer. CCW believes that in 2025, customers should not be being used as a reporting system for problems with an infrastructure network.  

According to Ofwat’s PR24 Final Determinations Expenditure allowances document, in AMP8, water companies will spend £651 million on continuous water quality monitors and £27 million for event duration monitors. Yet the information that those monitors will provide is of limited use. They only measure levels of dissolved oxygen, temperature and pH values, turbidity and levels of ammonia. They do not measure, for example, metals such as from highway drainage. These monitors may show high levels, but that pollution may not actually be coming from a overflow or treatment works. Other sectors – eg the Met Office – use technology much more expertly to model the results of an action or incident.  

Smart meters present huge opportunities for water companies. They can deliver many benefits – more real-time data should identify more leaks; customers and businesses can see clear information about their water consumption, which should help drive behavioural change to reduce usage; and smart meters will give water companies data to help them design innovative tariffs to encourage customers to use water wisely.  

However, in the coming smart meter rollout, CCW wants water companies to learn from early experiences of rolling out smart meters to make sure that installing and using them is as pain-free as possible for customers, and that customers are engaged properly so as to realise the water-saving benefits of this technology. 

CCW tracks water company complaints performance. Where possible, we have tracked complaints in the constituent parts of consolidated companies, usually where Ofwat has required the parent company to maintain separate information. We have insight into complaints performance for companies in two consolidated groups.  

South Staffordshire acquired Cambridge Water in 2013. On customer complaints, CCW continues to see different levels in performance between the two areas. Despite challenge from CCW, the performance is consistently worse for complaints in the Cambridge area. This is mainly driven by billing complaints.  

Northumbrian Water acquired Essex & Suffolk Water in 1995. Complaints performance is generally poorer in the acquired region of Essex and Suffolk compared to the parent area of Northumbrian Water.  

So consolidation does not appear to automatically improve services for consumers. 

It’s also worth noting that the fewer water companies there are, the fewer comparators there are in the sector. 

In CCW Water Matters 2023, Dŵr Cymru scored a public trust rating of 6.94. This was the highest rating of any water and sewerage company (WASC). Though customers rate Dŵr Cymru highly in customer satisfaction with services, this is not reflected in performance.  

In CCW research, customers consistently tell us their top priority is a clean, reliable source of water. But Dŵr Cymru’s performance in leakage, supply interruptions and drinking water quality is poor. Ofwat’s annual performance report has Dŵr Cymru as a “lagging company, for the third year in a row.”  

CCW complaint performance evidence for Dŵr Cymru does not demonstrate that the not-for-profit status has a demonstrable positive impact on customer service, in comparison to other ownership models.  

Dŵr Cymru is not sector-leading in any of the metrics CCW measures and it is currently worst in the sector for one metric – water complaints. CCW measures Dŵr Cymru’s customer complaint performance quarterly. For the Total Water Complaints measure, Dŵr Cymru has remained in, or near to, the worst performing quartile of the WASCs.  

For escalated complaints within the company (known as Stage 2 complaints), Dŵr Cymru has seen a deterioration in performance, moving from best performing quartile to worst performing quartile since 2022. (There has been a slight improvement in the last three quarters.) On complaints to CCW, Dŵr Cymru has an erratic performance, which has, until the last quarter, seen them flit between median and worst-performing quartile. 

Continued poor performance that resulted in regulatory financial penalties could result in Dŵr Cymru getting caught in a spiral of reduced investment due to reduced surplus funds. Or there could be an unforeseen shock in future that results in the need for massive new investment. But because of the Glas Cymru model, the company would not be able to raise new equity. The only recourse to new funds the company has is to increase debt. That could challenge its compliance with Ofwat financial resilience requirements.  

CCW takes a close interest in all the various models of water company ownership – here and in Scotland, Northern Ireland and overseas – to see whether there is ever any evidence that it affects performance for customers. We have never found any. 

In addition, it remains unclear to us how any company could be forced to become a different kind of company than what it already is if it did not want to make that change.