Ofwat has launched a new consultation on its draft guidance for an environmental incentives common framework – the regulator expects all parties, including developers, to collaborate and take a pragmatic approach to implementation.

Introducing the draft guidance, Ofwat says the need for partnership between all relevant parties lies at the core of its proposed common framework, in order to make environmental incentives as successful as possible.

Many water companies currently offer developers discounts on their new connection charges for meeting certain standards of water efficiency or sustainable drainage. Developers can play their part in reducing water demand and the impact on the environment by making new homes more water efficient (eg through more water efficient fixtures and fittings) and include sustainable drainage solutions (SuDS). The financial incentives offered by water companies can make it more commercially viable for them to do so.

However, according to Ofwat, the range of incentives on offer is wide, the levels of efficiency being incentivised are variable and in some cases, relatively unambitious. In addition, the principles and processes set by each company for agreeing incentives are, in many cases, unique to that company.

To simplify the process for developers, to support wider uptake, Ofwat is proposing to introduce a common framework for environmental incentives that is clear and consistent based on its high-level framework for environmental incentives drawn up in January 2024, in preparation for implementation from April 2025.

Ofwat intends the common framework to be accessible to all stakeholders and to facilitate the development of environmental incentives and promote greater sustainability in new homes.

The regulator is highlighting the fact  that its regulatory remit extends only to incumbent companies and new appointees. Nonetheless, Ofwat expects customers to work together to make a success of the EICF, saying  "it is more likely to work well if stakeholders engage positively with it and contribute to a shared ambition to succeed."

The draft guidance has been drawn up by the Environmental Incentives Working Group (EIWG) established by Ofwat in autumn 2023, which involved representatives from the water companies and housing developers – including Barratt Homes, the Housing Forum and the Future Homes Hub.

Key features of the draft Environmental Incentives Common Framework are:

• All water companies in England to offer at least one incentive for achieving water efficiency above the mandatory level
• All water companies in England may choose to offer bespoke incentives. Bespoke incentives are environmental incentives relating to water efficiency and/or sustainable drainage which use alternative and/or supplementary approaches to meeting relevant qualifying criteria.
• Water companies to publish processes for paying incentives and gaining compliance.
• Incentive earning properties may be audited.
• All parties to collaborate to ensure the success of the scheme.

The closing date to submit responses to to the consultation is 10 September 2024 - click here to download the consultation paper