Ofwat has raised concerns with the Secretary of State for Environment Food & Rural Affairs about Southern Water’s latest draft Water Resources Management Plan (WRMP) published in September 2024 and called for the company to submit a revised draft plan by 5 March 2025.

The water sector regulator first commented on Southern Water’s initial draft WRMP in February 2023.

Ofwat has now published a letter sent by Paul Hickey,Senior Director at RAPID and Environmental Planning Director dated 6 December to Minister Steve Reed in response to the water company’s consultation which ran from September to December 2024 on its revised draft WRMP published in July last year.

While Hickey acknowledges that the water company has addressed some of the issues previously raised by Ofwat , he goes on to say:

“..there remain some instances where we consider that our first response feedback has not been resolved as we expected….

“…. there remain areas where the latest plan lacks sufficient and convincing evidence to demonstrate fully the identification of best value, low-regrets investments in the interests of customers and the environment.”

The letter says these include:

• concerns with the WRMP24 starting position and thus feasibility of meeting WRMP24 forecasts. This relates to concerns about WRMP19 underperformance on demand improvements and delivery of supply schemes. In particular, the gap between current and forecast supply-demand positions is driven by underperformance in delivering leakage reductions in line with WRMP19 forecasts. The company should continue to deliver its WRMP19 programme to minimise the gaps in the supply-demand balance created by under or non-delivery;
• the company has not demonstrated that it has considered a sufficiently broad and diverse range of option types.

“Without such we are unable to conclude, with full confidence, its decision making at WRMP24 for the resolution of shorter-term deficit issues and use of drought options in drought-specific situations are robust,” Hickey writes.

Other concerns flagged up in the detailed appendix which accompanies the letter include concerns that the WRMP24 starting position is driven in particular by poor performance on leakage reduction during WRMP19. Southern Water’s WRMP19 Annual Review 2023-24 reports current leakage at 107.5 Ml/d, requiring a reduction of 32.4 Ml/d in just two years to meet the 75.1 Ml/d 2025-26 forecast in the September 2024 rdWRMP.

“The company's historical leakage reduction performance does not give confidence this can be achieved and raises concern on the WRMP24 forecast,” the appendix states.

It also draws attention to inconsistencies in the company’s metering proposals, pointing out that in the September 2024 drWRMP, Southern Water proposes 957,195 meter upgrades – which is lower than the 984,926 meter upgrades outlined in the company’s PR24 draft business plan.

Metering programme allowances set by Ofwat through PR24 are based on the 984,926 figure in the company's draft business plan. The appendix says that the apparent discrepancy between the WRMP and the business plan is not explained and that it is “therefore not clear whether the WRMP24 activities are in fact programmed to deliver the higher level of metering activity proposed for funding through the business plan, whether this higher level of metering activity is required to achieve the necessary supply-demand balance, whether it is to deliver additional benefit to the supply-demand balance or whether in fact only the lower number of meter upgrades are required or are otherwise justifiable.”

The letter also states that Southern Water has not provided clear and robust evidence regarding the feasibility analysis of new options, (primarily for short term use in drought-specific situations, such as sea tankering and desalination), including additional detail on their operational, regulatory and political barriers and mitigations.

According to the RAPID Chief, the water company’s plan should also more clearly explain how any new options are incorporated into best value analysis and how they perform against common metrics.

He concludes:

“We consider that Southern Water should be requested to respond promptly to its re-consultation and to produce a final WRMP enabling it to progress WRMP24 programme delivery without further delay...

“We suggest that the company be requested to submit its Statement of Response and a revised draft WRMP24 by the 5 March 2025 at the latest.”