The regulatory regime for the water industry has played a major role in securing service and environmental improvements and increased efficiency. However, following on from a recent CIWEM conference where 87 percent of delegates supported a comprehensive review of the financial regulation of water, a presentation at Water & Environment 2010: CIWEM’s Annual Conference will address how the framework needs to develop to respond to the new challenges facing the industry, in particular to encourage long-term sustainable solutions and meet the challenge of climate change.
There are a number of limitations of the current economic regulation framework:
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It can encourage short-term efficiency savings at the potential cost of ensuring that infrastructure is maintained to meet future requirements
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Focus on the short term has led to a lack of appreciation of the potential financial and carbon impacts of the continuing increase in quality standards
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It provides incentives for meeting specific targets and carrying out defined activities, rather than providing best overall outcomes to customers and the environment
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The price-setting process has previously led to over-estimation of costs by some companies in preparing business plans, which are then subject to cut-backs by the regulator with the risk of the regulator getting it wrong
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The regulatory framework can result in an excessive regulatory burden in terms of the amount of information required
Frank Grimshaw and Min Bansel from Severn Trent Water will look at how to improve the framework to ensure that the right outcomes are achieved for customers and the environment, including incentive mechanisms to promote service improvement and sustainable solutions, and to encourage production of robust business plans. They will also review innovations for PR09, including the new Capital Expenditure Incentive Scheme, carbon accounting and the widespread use of cost-benefit analysis.
For those interested in finding out about sustainable regulation within the water industry, Frank Grimshaw and Min Bansel will be giving a presentation at Water & Environment 2010: CIWEM’s Annual Conference on the 29th April at the Olympia Conference Centre, London. For more information, go to http://www.ciwem.org/events/annual_conference.
