Cathryn Ross, Ofwat - Sector Challenges & Water 2020

Cathryn Ross, Chief Executive of Ofwat, speaking at Moody's UK Water Sector Conference, has called on the sector to address the opportunities and challenges of PR14 and Ofwat's Water 2020 work programme.

"There are really significant challenges.  And challenges that the sector - not the regulator but the sector - will need to meet. What do they mean? Well, many of the things that Ofwat has been saying for sometime will remain important.

"The sector will only meet these challenges successfully if it focuses on outcomes, if it really understands and manages the risk associated with these outcomes, and if companies make sensible decisions about whether they are best placed to manage those risks or where they should contract with others to do so.

"But of course, focussing on outcomes, no matter how efficiently they are delivered won't be enough. Relationships - how customers, but also other stakeholders - feel about their interacts matter too.

"All of these things underpinned PR14. And they underpin our strategy, which sets out our vision for the sector of trust and confidence in water and waste water services.  A vision that we share with the sector itself, and many of its stakeholders."

On the subject of Water 2020, she said, "Let’s be clear - the sector is not going to deliver against those challenges if it doesn’t learn how to do more with less.  Not just doing things a bit cheaper but making the best use of scarce resources and doing things in new and different ways. Markets are an important part of the answer here.

"The key to the sector's ability to meet those complex and dynamic challenges rests is in doing more for less. Or to put it another way, creation of value. Because only if value is created can there then be a discussion about how that value is allocated, between investors (and investors have to get something out of this otherwise it won’t happen), customers and the environment.

"That is what our Water2020 programme is all about.  Not about ‘regulation and PR19’ over here and ‘markets’ over there – but how we can build on what we all achieved in PR14 to use markets and regulatory tools to enable companies to create value to the benefit of everyone."

Referring to opportunities in markets, Ross states that Ofwat see big opportunities in the upstream value chain, in particular for water resources and sludge. New technology and changes in prices of related products mean that sludge is now viewed as an asset, a source of energy.

"The sludge market seems to us - and indeed to some of the companies who are at the cutting edge of sludge treatment - to have real potential for value creation."

Water trading is another area where Ofwat see potential for more value creation by making better use of markets.

A full transcript of the speech is available here.