Wessex Water is warning that water and sewerage company regulation must be revolutionised now if the Government’s 25 Year Environment Plan (25 YEP) is to meet its bold ambitions.

Wessex Water was commenting when it represented the industry at an event held to celebrate the passage of the Environment Act and examine the key next steps required to protect and restore the UK’s natural environment.

Former Prime Minister Theresa May, now Chair of multi-stakeholder alliance the Aldersgate Group, was among the speakers at the virtual event that championed a competitive and environmentally sustainable economy.

Wessex Water’s Group Director of Environmental Futures Guy Thompson outlined his company’s vision for outcome-based regulation, giving companies the opportunity to make greater environmental improvements using markets – with the aim of driving investment in the private sector so the financial burden is not passed on to billpayers.

Guy Thompson (pictured) said:

“Huge amounts of political capital have been expended on agreeing targets, which invariably lie beyond the term of office of the administration of the day, at the expense of credible plans to finance and integrate the delivery of the targets.

“As a highly regulated sector, there is an opportunity to use the water industry as a testbed for a different approach and accelerate delivery of the 25 YEP on the ground.

“We have an opportunity to do this now. If we wait for another regulatory cycle to pass us by because of indecision, fear of risk or politicking we will be 11 years through the plan before anything happens.

“This requires a leap of faith to take the national targets and turn them into a system of incentives and obligations on the private sector that will drive private investment. Not permits to pollute or offset harm but mechanisms to drive positive change.”

Concerns that cutting carbon emissions might dominate the agenda

With 10 defined goals set out in the plan, Thompson is concerned that cutting carbon emissions might dominate the agenda and told delegates that the water industry was ready to embrace new obligations during PR24 – provided the focus of regulation shifts away from narrow, asset-based solutions.

For the YEP 25’s place-based targets (nature recovery, water and carbon sequestration), Wessex Water is calling for localisation and incentives that integrate delivery of the targets on the ground. This transition could be achieved by:

• Setting local environmental outcomes at a catchment or area scale for each of the place-based 25 YEP goals, in line with the Environment Act targets framework.
• Aligning Local Nature Recovery Strategies with these local outcomes.
• Establishing five-year outcomes for environmental improvement.

Thompson warned:

“There is a risk we over-focus on carbon at the expense of the other nine goals of the 25 YEP. We must not fall into the trap of focusing on a single outcome or we’ll lose focus on the bigger prize to be the first generation to leave the environment in a better place.

“Existing regulation is input/output based and prescriptive, driving us to narrow asset-based solutions that create perverse effects on other environmental outcomes.

“We need a much more joined-up view and open dialogue with regulators to promote the lowest carbon options and integrated action on environmental improvement.”

In November 2021, Wessex Water published a report on Outcome Based Environmental Regulation (OBER) developed with economic consultancy experts Frontier Economics. 

Click here to download the OBER report in full