The UK\u2019s spending watchdog fears water companies are not equipped to deliver nine new reservoirs and have underestimated the cost by \u00a352bn.<\/p>\n
In a new report into the privatised water industry, the National Audit Office<\/a> (NAO) raised significant concerns over the sector\u2019s ability to run competitive tenders and manage and deliver contracts.<\/p>\n It comes as companies plan to spend \u00a3290bn on infrastructure and investment over the next 25 years, but regulator Ofwat<\/a> estimates a further \u00a352bn will be needed to deliver up to 30 water supply projects, including nine reservoirs<\/a>.<\/p>\n Gareth Davies, head of the NAO, warned that urgent action was needed and the sector needs to attract an unprecedented amount of investment.<\/p>\n \u201cGiven the unprecedented situation facing the sector, Defra and the regulators need to act urgently to address industry performance and resilience to ensure the sector can meet government targets and achieve value for money over the long term for bill payers,\u201d he said.<\/p>\n The report said the new projects, which will see construction start over the next 15 years, were \u201ccritical\u201d to the nation\u2019s future water supply but the NAO fears the sector lacks the skills to deliver them.<\/p>\n \u201cOfwat recognises that such projects need greater certainty than the five-year price cycle offers. It also recognises that the water companies have delivered very few projects of this size and scale in the last 30 years and therefore do not necessarily have the depth of skills or experience to do so in the volume now expected,\u201d it said.<\/p>\n \u201cGiven the scale and the early stage of all of these projects, there remains considerable uncertainty.<\/p>\n \u201cOfwat told us there is also a risk that water companies may not currently have the procurement skills to run a competitive tender and manage and deliver contracts for this scale and duration, as this is very different from their day-to-day operations.\u201d<\/p>\n Ofwat told the NAO it expects water companies to use third parties to design, build, finance and operate 24 of the 30 projects, but retain the projects under the water companies\u2019 own regulatory licences. It expects three of the 30 projects will have a separate licence and be regulated separately from the water companies.<\/p>\n The NAO criticised all three regulators \u2013 Ofwat, the Environment Agency and the Drinking Water Inspectorate \u2013 for not having a clear understanding of the condition of water infrastructure and the funding needed to maintain it.<\/p>\n It said the average rate of replacement for water assets was 125 years but if the current pace is maintained, it will take 700 years to replace.<\/p>\n \u201cThe regulators do not have a shared understanding of the condition of water and wastewater assets, and the level of funding needed to maintain them,\u201d it said.<\/p>\n \u201cOfwat expects companies to maintain assets through base expenditure. Despite overspending on operational expenditure over the last four years, companies have done less work on specific areas of asset health than Ofwat\u2019s expectations.\u201d<\/p>\n It said water companies\u2019 spend is expected to increase by 70 per cent over the next five years (2025\u20132030) compared with the previous five\u00a0years\u00a0(2020\u20132025).<\/p>\n \u201cDefra and the water sector\u2019s regulators have not encouraged water companies to spend what they need to deliver the performance expected. The sector now faces significant environmental and supply challenges,\u201d it concluded.<\/p>\n \u201cTo meet these challenges, it will need to attract investment and spend at a rate not seen before. The regulators must understand the scale of the challenge in terms of cost and deliverability and the condition of assets across the sector, ensure the sector raises the investment needed and meets government outcomes, and achieve value for money for bill payers.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":" The UK\u2019s spending watchdog fears water companies are not equipped to deliver nine new reservoirs and have underestimated the cost by \u00a352bn. In a new report into the privatised water industry, the National Audit Office (NAO) raised significant concerns over the sector\u2019s ability to run competitive tenders and manage and deliver contracts. It comes as …<\/p>\n","protected":false},"author":155153,"featured_media":503718,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ep_exclude_from_search":false},"categories":[565],"tags":[],"yoast_head":"\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\t\n\t\n\t\n