Leakage is a key area of focus in a new consultation Ofwat has launched on its proposed changes to the regulatory reporting requirements for 2021-22 for the Annual Performance Reports (APR) produced by the water companies.

The APRs are intended to explain all aspects of performance, including financial and operational performance, and the steps the water companies are taking to improve.

Folllowing on from the Competition and Markets Authority (CMA) Price Review 2019 (PR19) appeals process, the paper says the CMA identified a clear need to gather more detailed data on the efficient costs of leakage prevention, detection, and reduction. Leakage performance, and costs for its reduction, were areas of focus during both PR19 and the CMA redeterminations.

“We conclude that we need consistent, more granular information than we have been collecting to date” Ofwat comments.

Ofwat is proposing that the water companies should report on the cost, leakage saved and scale of each activity (eg active leakage control, pressure management, proactive repair) they undertake to both maintain and reduce leakage.

The regulator has suggested that activities should be grouped in common areas, e.g. detection, repair and prevention, and that it would be necessary for any activity breakdown to include leakage savings which result from activities whose costs may be reported elsewhere, such as installing and replacing meters.

“We also consider it will be important to provide measures of current and cumulative scales of activity such as total number of supply pipes repaired, total meter penetration, or overall percentage of network under pressure management”, the paper states.

Leakage - "consistent reporting will be challenging"

Ofwat goes on to acknowledge that consistent reporting will be challenging due to differences between companies in, for example:

• classifying leakage control as reactive or proactive (or detected/reported, or visible/detected);
• using assumptions to estimate the leakage benefit delivered by each activity – especially identifying leakage prevented;
• separating costs and leakage benefit between maintaining and reducing leakage for activities that may do both; and
• assigning both costs and leakage benefit to activities that provide a long term benefit in multiple service areas, such as mains replacement that could benefit leakage, water quality, low pressure and supply interruption performance.

Ofwat comments in the paper:

“We know that the information we collect now will not be consistent across the industry. But to address the challenge laid down by the CMA we need to develop better data and explore what comparisons we can make in time for the next price review in 2024.

“At the very least we could use the new data to provide broad higher level comparisons through grouping activities by areas such as detection, repair and prevention.”

"We welcome proposals from stakeholders on the most effective approach for collecting consistent and comparable leakage information.. We also invite comments on the most effective ways of enabling wider access to this data to support developments in analysis and innovative approaches to addressing leakage.”

Proposals to introduce mandatory standardised reporting for both operational and embedded GHG emissions in coming years

The paper also includes proposals for reporting requirements in other areas, including greenhouse gas emissions, bioresources and jointly owned or jointly operated assets.

This year Ofwat has also introduced a new requirement for all companies delivering green economic recovery schemes to provide an annual update on their progress as a stand-alone supporting appendix to be published alongside the Annual Performance Report.

The regulator also intends to introduce mandatory standardised reporting for both operational and embedded greenhouse gas (GHG) emissions over the coming years.

The consultation paper says:

“Standardised, transparent and accessible data on both operational and embedded GHG emissions will allow for greater scrutiny from both Ofwat and other stakeholders. As well as this, it will help to inform investment decisions in the run-up to PR24 and the setting of targets to drive and monitor progress in emissions reductions. “

Following on from voluntary standardised reporting of operational emissions in 2020-21, Ofwat proposes to introduce a mandatory standardised reporting requirement for the 2021-22 reporting year. The regulator also requires the water companies to provide a ‘Strengths’, ‘Weakness’, ‘Opportunities’, ‘Threats’ (SWOT) based commentary. Ofwat said a SWOT approach will allow for a better understanding of the data to emerge by explaining how progress is achieved, and the success of interventions.

For embedded GHG emissions, Ofwat is proposing that companies voluntarily report their embedded emissions for the 2021-22 reporting year. Responses to the consultation will inform the final decision on whether to introduce this voluntary reporting requirement for 2021-22.

For embedded emissions, reporting is also a first step in enabling the industry to develop strategies for embedded carbon reduction.

Proposed areas /s of data or other information for voluntary reporting is inviting consultees to comment on include:

• Design, construction and/or maintenance activities
• Number and/or size of suppliers
• Project spend and/or value
• Inputs and/or materials
• Specific services
• Number of GHGs reported on by suppliers

Deadline to submit responses to the consultation is 8 July 2021. Ofwat then intends to publish the revised regulatory accounting guidelines (RAGs) in late 2021. The changes will be effective for the 2021-22 reporting year.

Click here to download the paper Consultation on regulatory reporting for the 2021-22 reporting year