Independent Water Commission – Final Report (PDF, 21 July 2025)

Independent Water Commission
Final Report
21 July 2025

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Contents

Foreword ................................ ................................ ................................ ............................... 6
Executive Summary ................................ ................................ ................................ .............. 9
Wales Summary ................................ ................................ ................................ .................. 11
What the recommendations mean in practice ................................ ................................ ..... 15
Chapter 1: Strategic direction for the water system ................................ ............................. 19
1.1: Government strategic direction ................................ ................................ ................. 19
Background ................................ ................................ ................................ .................. 19
Issues ................................ ................................ ................................ .......................... 22
Conclusions and recommendations ................................ ................................ ............. 27
1.2: Setting direction for the water industry ................................ ................................ ...... 35
Background ................................ ................................ ................................ .................. 35
Issues ................................ ................................ ................................ .......................... 37
Conclusions and recommendations ................................ ................................ ............. 39
Chapter 2: Planning ................................ ................................ ................................ ............ 44
Background ................................ ................................ ................................ ..................... 44
Current planning frameworks ................................ ................................ ....................... 44
Issues ................................ ................................ ................................ .......................... 48
Conclusions and recommendations ................................ ................................ ............. 60
Chapter 3: Legislative framework ................................ ................................ ........................ 97
3.1 Legislative Framework and targets ................................ ................................ ............ 97
Background ................................ ................................ ................................ .................. 97
Issues ................................ ................................ ................................ ........................ 101
Conclusions and recommendations ................................ ................................ ........... 103
3.2 Wastewater and drainage ................................ ................................ ........................ 106
Background ................................ ................................ ................................ ................ 106
Issues ................................ ................................ ................................ ........................ 108
Conclusions and Recommendations ................................ ................................ .......... 110
3.3 The Water Framework Directive (WFD) ................................ ................................ ... 113
Background ................................ ................................ ................................ ................ 113
Issues ................................ ................................ ................................ ........................ 120
Conclusions and recommendations ................................ ................................ ........... 126
3.4 Monitoring the Water Environment................................ ................................ ........... 133
Background ................................ ................................ ................................ ................ 133

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Issues ................................ ................................ ................................ ........................ 134
Conclusions and recommendations ................................ ................................ ........... 136
3.5 Constrained discretion ................................ ................................ ............................. 139
Background ................................ ................................ ................................ ................ 139
Issues ................................ ................................ ................................ ........................ 142
Conclusions and recommendations ................................ ................................ ........... 144
Chapter 4: Regulator reform ................................ ................................ .............................. 153
4.1 Structural reform of the regulatory landscape ................................ .......................... 153
Background ................................ ................................ ................................ ................ 153
Issues ................................ ................................ ................................ ........................ 157
Conclusions and recommendations ................................ ................................ ........... 162
Chapter 5: Regulation reform ................................ ................................ ............................ 176
5.1 Economic Regulation ................................ ................................ ............................... 176
Background ................................ ................................ ................................ ................ 176
Issues ................................ ................................ ................................ ........................ 180
Conclusions and recommendations ................................ ................................ ........... 193
5.2 Environmental Regulation ................................ ................................ ........................ 226
Background ................................ ................................ ................................ ................ 226
Issues ................................ ................................ ................................ ........................ 230
Conclusions and recommendations ................................ ................................ ........... 235
5.3 Drinking Water Regulation ................................ ................................ ....................... 243
Background ................................ ................................ ................................ ................ 243
Issues ................................ ................................ ................................ ........................ 246
Conclusions and recommendations ................................ ................................ ........... 249
5.4 Water resources ................................ ................................ ................................ ...... 252
Background ................................ ................................ ................................ ................ 252
Issues ................................ ................................ ................................ ........................ 257
Conclusions and recommendations ................................ ................................ ........... 263
5.4 Affordability and consumer protections ................................ ................................ .... 269
Background ................................ ................................ ................................ ................ 269
Issues ................................ ................................ ................................ ........................ 272
Conclusions and recommendations ................................ ................................ ........... 278
Chapter 6: Company structures, ownership, governance and management ...................... 285
6.1: Ownership and governance ................................ ................................ .................... 285
Company ownership and performance ................................ ................................ .......... 285
Background ................................ ................................ ................................ ................ 285

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Issues ................................ ................................ ................................ ........................ 287
Conclusions and recommendations ................................ ................................ ........... 291
Governance and management ................................ ................................ ................... 306
Background ................................ ................................ ................................ ................ 306
Issues ................................ ................................ ................................ ........................ 307
Conclusions and recommendations ................................ ................................ ........... 310
Section 6.2: Investment and financial resilience ................................ ............................ 314
Investment ................................ ................................ ................................ ................. 314
Background ................................ ................................ ................................ ................ 314
Issues ................................ ................................ ................................ ........................ 314
Conclusions and recommendations ................................ ................................ ........... 321
Financial resilience ................................ ................................ ................................ .... 330
Background ................................ ................................ ................................ ................ 330
Issues ................................ ................................ ................................ ........................ 335
Conclusions and recommendations ................................ ................................ ........... 339
Section 6.3: Competition ................................ ................................ ............................... 347
Business Retail Market (BRM) ................................ ................................ ................... 347
Background ................................ ................................ ................................ ................ 347
Issues ................................ ................................ ................................ ........................ 349
Conclusions and recommendations ................................ ................................ ........... 353
New Appointments and Variations (NAVs) ................................ ................................ . 355
Background ................................ ................................ ................................ ................ 355
Issues ................................ ................................ ................................ ........................ 357
Conclusions and recommendations ................................ ................................ ........... 359
Direct Procurement for Customers (DPC) and Specified Infrastructure Projects
Regulations (SIPR) ................................ ................................ ................................ .... 363
Background ................................ ................................ ................................ ................ 363
Issues ................................ ................................ ................................ ........................ 364
Conclusions and recommendations ................................ ................................ ........... 366
Chapter 7: Infrastructure and asset health ................................ ................................ ........ 369
7.1 Resilience and Asset Health ................................ ................................ .................... 369
Background ................................ ................................ ................................ ................ 369
Issues ................................ ................................ ................................ ........................ 371
Conclusions and recommendations ................................ ................................ ........... 377
7.2 Infrastructure Security................................ ................................ .............................. 385
Background ................................ ................................ ................................ ................ 385

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Issues ................................ ................................ ................................ ........................ 387
Conclusions and recommendations ................................ ................................ ........... 388
7.3 Infrastructure Delivery................................ ................................ .............................. 390
Background ................................ ................................ ................................ ................ 390
Issues ................................ ................................ ................................ ........................ 393
Conclusions and recommendations ................................ ................................ ........... 396
7.4 Monitoring and assurance of infrastructure delivery ................................ ................. 403
Background ................................ ................................ ................................ ................ 403
Issues ................................ ................................ ................................ ........................ 405
Conclusions and recommendations ................................ ................................ ........... 406
7.5 Supply chain and labour force capacity ................................ ................................ ... 411
Background ................................ ................................ ................................ ................ 411
Issues ................................ ................................ ................................ ........................ 412
Conclusions and recommendations ................................ ................................ ........... 414
7.6 Innovation and technology ................................ ................................ ....................... 417
Background ................................ ................................ ................................ ................ 417
Issues ................................ ................................ ................................ ........................ 419
Conclusions and recommendations ................................ ................................ ........... 421
Chapter 8: Implementation ................................ ................................ ................................ 428
Glossary of terms and acronyms ................................ ................................ ....................... 439
Annex A: List of recommendations with indicative delivery approach and legislative changes
................................ ................................ ................................ ................................ ......... 444

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Foreword

It has been a privilege to lead this Commission.
All of us depend, every day, on the supply of safe
drinking water and treatment of wastewater. It is
fundamental to our economy, public health and food
production. But it is more than a utility. Our rivers,
lakes, coasts and estuaries are part of our national
identity.
Resetting this sector and restoring pride in the future
of our waterways matters to us all. In countless
conversations I have been struck by the urgent need
and passion for change. My team and I have met
just shy of 250 organisations and individuals between us. I am grateful to all those
who have contributed generously and constructively with their time, expertise and
challenge. That includes the 50,000+ responses to our Call for Evidence.
I have said it before, but it bears repeating. There is no single, simple change, no
matter how radical, that will reset the water sector and restore the trust that has been
lost. This sector requires fundamental reform on all sides – how we manage the
demands on water, how the system is regulated, how companies are governed and
how we manage the critical infrastructure on which we all rely.
In this report, my objective is to set the system for water in England and Wales on a
course to lasting change across several key areas.
First, we must address the absence of a long-term, cross-sector strategy for water. It
may sound academic, but it is profoundly important. A clear set of national priorities
for water – covering the water industry, agriculture, land-use, energy, transport,
housing development – is essential. Without it, we will continue to be dogged by
inconsistency, short termism, unintended consequences and risk willing the ends
without ever fully understanding the means required.
National priorities must be translated into locally owned plans, through empowered
and accountable regional bodies. At present, that local engagement and ownership
is missing, cutting off decisions on water from local development and leaving many
communities feeling excluded from decisions that affect their water environment. We
propose a new system to put this right.
Second, the legal framework for water must be modernised. The way we use and
interact with water has changed dramatically since many of the existing
environmental laws were introduced. We set out where legislation needs updating

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and why. We have also set out where we believe greater flexibility in the legislative
framework would be helpful, provided strong safeguards are in place.
Third, we have made significant recommendations on how the water sector is
regulated. Organisational change is never an easy option, but I believe that a new
integrated regulator for water – bringing together environmental, economic and
drinking water functions – would be in the best long-term interests of our water
supply, our water environment, consumers and investors in the water industry.
Much of what we care about is environmental outcomes under one set of regulators,
yet how those are delivered and paid for is done via a different regulatory system. A
single regulator would also ensure a ‘whole firm view’ of water company performance
and compliance.
We therefore recommend bringing together Ofwat, the Drinking Water Inspectorate,
and the water environment functions of the Environment Agency and Natural
England into a new organisation in England. In Wales, we propose embedding new
economic regulatory responsibilities within Natural Resources Wales.
In addition, we have made specific proposals on economic, environmental, water
supply, drinking water and consumer regulation. There is a great deal to cover here.
For the environment, we recommend greater transparency in areas such as operator
self-monitoring and scrutiny of water company reporting, and stronger oversight of
pollution from other sources such as agriculture and highways. We also cover
abstraction, drinking water standards and water supply. After one of the driest
springs on record, we believe more compulsory water metering, changes to
wholesale tariffs for industrial users, and greater water reuse and rainwater
harvesting schemes are all needed.
For consumers, we have set out changes to improve affordability and customer
service, including the introduction of a single social tariff. As part of this, I have
recommended the Government consider upgrading the Consumer Council for Water
into a fully-fledged ombudsman for customers and transferring responsibility for
consumer advocacy to Citizens Advice.
For economic regulation, we have set out detail of a new, fundamental rebalancing
with the introduction of a company-specific supervisory function to sit alongside and
to inform the econometric, industry-wide benchmarking approach that currently
dominates Ofwat’s Price Review and incentive-setting framework. We are also
proposing changes to the Price Review process that include new mechanisms to
make sure sufficient funding is dedicated to asset maintenance, to make the appeals
process shorter and simpler and to restore investor confidence that investing in the
sector is a ‘fair bet’.
We look at water company structures, ownership and governance. I understand the
concerns raised by many about profit in the provision of water and wastewater.
Within our Terms of Reference, we have looked in depth at ways to ensure water

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companies are aligned with the public interest. Alongside a stronger regulatory
approach, we have set out changes to governance including a new regime for senior
accountability and changes to company licence conditions. We also propose giving
the regulator the power to block material changes in control of water companies – for
example, where investors are not seen to be prioritising the long-term interests of the
company and its customers.
And finally, we cover infrastructure – the underground pipes and other assets that
underpin our water and wastewater services. We need far greater clarity on the
health of these crucial assets and the resilience of the system as the infrastructure
ages and the pressures upon it increase. Given the importance of this vital national
infrastructure, we have proposed new national resilience standards to drive the
action and funding necessary to ensure these assets are fit for the future.
As I bring the Commission to a close, I would like to thank the Secretary of State and
Deputy First Minister for Wales for appointing me to lead such important work. I
would like to thank my excellent Advisory Group, whose insights have shaped and
sharpened our thinking. And finally, I must thank the incredibly hard-working and
indefatigable Commission Secretariat team without whom this report would not have
been possible.
Throughout my career, I have encountered many complex and important public
policy issues but securing the future for water has, perhaps, been the most important
of them all. While it will not happen overnight, I am convinced that if the major
changes recommended in this report are adopted and pursued with sustained
commitment, we can restore trust and have a future for water that is desired on all
sides.
Sir Jon Cunliffe, July 2025

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Executive Summary
The Independent Water Commission has undertaken a comprehensive review of the
water sector. Following a Call for Evidence and extensive engagement with a diverse
set of stakeholders, this report sets out the Commission’s final conclusions and
recommendations. These are organised around seven themes, where the
Commission believes that ambitious change is needed to drive a fundamental ‘reset’
of the water sector. It has also considered issues around implementation.
Chapter 1 of the report focuses on the strategic direction for the water system
provided by the UK and Welsh governments. The Commission is recommending that
new national strategies should be brought forward and has outlined elements these
should include to provide a better long-term vision that drives delivery, articulates
priorities and trade-offs, and has a cross-sectoral focus. It is further recommending
that these elements are mirrored in improved guidance, at a more detailed level, to
the water industry.
Chapter 2 focuses on planning for the water system, the bulk of which is undertaken
currently by the water industry. The Commission is recommending the introduction of
systems planners that will more effectively integrate planning across the whole water
system – at a regional level in England, and the national level in Wales. To improve
industry planning, it is further recommending that current planning approaches are
significantly streamlined, additional flexibility is built into the 5-year Price Review
cycle, and a common and robust approach to economic appraisal is implemented.
Chapter 3 focuses on the legislative framework for water. To reduce complexity
and increase clarity and focus, the Commission is recommending that this framework
is reviewed, with a particular focus on the Water Framework Directive and the Urban
Wastewater Treatment Regulations. It is recommending that legislative changes
should drive solutions to reduce pollutants and rainwater entering the system, that a
public health objective should be included in the overarching framework, that the
regulator should be better resourced to improve monitoring, and that the regulator
should have more ‘constrained discretion’ to achieve better outcomes.
Chapter 4 focuses on regulator reform. The Commission is clear that there is a
need for a much stronger and integrated regulatory framework – one that can
respond to challenges, regulate the water sector as a whole and command public
confidence. In England, the Commission is recommending that the water functions of
all the existing regulators are combined into one integrated water regulator for
England. In Wales, it is recommending that a new economic regulator is created,
either embedded within the existing environmental regulator or established as a
standalone independent body.
Chapter 5 focuses on regulation reform. As part of a fundamental reset in the way
the regulator engages with companies, the Commission is recommending that it
adopts a ‘supervisory approach’ and has outlined several elements that should be

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considered in doing so. It is further making recommendations across all functions of
the regulator to address stakeholder concerns. These include improvements to the
Price Review methodology to support maintenance spending and reduce the
volatility of returns, strengthened monitoring and enforcement powers to improve
environmental outcomes, measures to incentivise water efficiency and thereby
reduce pressures on the water supply, improved incentives for companies to raise
levels of customer satisfaction where these are currently low, and enhanced support
for low-income households and for customers with cause for complaint.
Chapter 6 focuses on water company structures, ownership, governance and
management. To ensure water companies act in the public interest, the Commission
is recommending enhanced powers for the regulator over owners as well as
strengthened governance standards and a new regime to make senior executives
directly accountable. Along with reforms to regulators and regulation, it is further
recommending actions by regulators and government to reduce risks to investing in
the water industry and thereby attract long-term investors. Recognising past financial
weaknesses, it is recommending measures to strengthen regulatory oversight of
company finances, including through the supervisory approach, and to establish a
formal recovery regime. The Commission is also recommending reviews, where
appropriate, of competition markets for the water industry.
Chapter 7 focuses on water industry infrastructure and asset health. To improve
resilience, the Commission is recommending that statutory resilience standards be
adopted, that requirements for companies to map their assets should be
strengthened, and oversight improved through the supervisory approach. It is also
recommending that legislation and enforcement powers relating to security should be
strengthened. To support more timely delivery of infrastructure, the Commission is
making recommendations to strengthen arrangements in four areas: planning,
planning processes, regulatory coordination, and standardised practices. The
Commission is further recommending reviews of Ofwat’s delivery assurance
frameworks and delivery incentive mechanism, and that supervisory teams should
gain assurance on workforce and supply chains. And to support innovation, it is
recommending that regulatory sandboxes are introduced and that the efficacy of
innovative funding mechanisms is reviewed.
Chapter 8 focuses on implementation of the Commission’s recommendations. The
Commission recognises that some reforms will be complex and lengthy, with the
potential to create significant uncertainty. It is therefore recommending that the UK
and Welsh governments produce transition plans, as well as establishing an
implementation advisory group. It also sets out which recommendations which could
be delivered earlier.

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Wales Summary
1. In reviewing the water industry across England and Wales, the
Commission has acknowledged the distinct and unique nature of the
water system in Wales. Water holds deep cultural significance in Wales,
and it remains a sensitive issue, particularly due to historical events such as
the creation of the Tryweryn reservoir.
2. Since devolution, Wales has gained increasing authority over water
and environmental policy. These areas are now fully devolved.
3. One of the key differences in approach is the way public bodies in
Wales, including the Welsh Government and NRW, are required by law,
through the Well-being of Future Generations (Wales) Act 2015 and the
Environment (Wales) Act 2016, to work together to ensure the
sustainable management of natural resources for current and future
generations. This has driven certain differences compared to England, a
notable example is the Price Review Forum, convened by the Welsh
Government to bring together regulators, water companies, and
stakeholders during the water industry price review process in a
collaborative way.
4. The pressures facing Welsh water systems are also different. Wales has
a significantly higher proportion of land used for agriculture, 90% compared
to 67% in England. Agricultural and transport runoff are major contributors to
river pollution in Wales, with 62% of phosphorous loading across Special
Areas of Conservation (SAC) rivers in Wales attributed to agriculture, with
28% attributed to storm overflows.
Strategic direction
5. The recommendation for a new National Water Strategy for Wales will
establish a stronger national direction for the Welsh water system, with
a clear framework of priorities and interim targets to drive delivery. For the
two Welsh water companies, Dŵr Cymru and Hafren Dyfrdwy, this will be
bolstered through a new Ministerial Statement for Water Industry Priorities.
Systems planning
6. A new independent national systems planner will enable a more
integrated approach to planning across the range of sectors interacting
with water in Wales, including the agricultural sector. It will also have
responsibility for directing important sources of funding in line with priorities
set out in the National Water Strategy for Wales. As noted in Chapter 8, the
Welsh and UK governments will need to ensure effective cooperation
agreements to manage cross-border water bodies such as the Wye.

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Legislative Framework
7. A review of legislation, including the WFD Regulations and UWWTR
should ensure legislation is updated to better align with the Well-being
of Future Generations (Wales) Act 2015 and other Welsh priorities. The
introduction of public health in a new water framework, supported by
evidence from a new public health taskforce led by the Welsh Chief Medical
Officer, is a significant change aimed at ensuring recreational water use in
Wales is better considered.
8. This Chapter also recommends that the concept of constrained
discretion is taken forward across Wales. This is not a new concept,
however there is cultural and legislative change needed to encourage its
effective deployment, within constraints, in Wales. In NRW there are already
alternative options for testing innovative solutions through experimental
powers, but these are not widely used due to risk of challenge or a
perception that traditional approaches will provide quicker and more reliable
solutions.
Regulator reforms
9. The Commission has heard ongoing concerns about Ofwat’s ability to
balance the needs of England with the needs of Wales. The Commission
recommends the Welsh Government should establish a new economic
regulator for Wales, which could be integrated into NRW. Alternatively, it
could sit as a stand-alone body.
10. This would be a significant development, which would ensure that
economic regulation of Welsh water companies better reflects the
priorities and context of Wales. It is likely to take some time to establish
any new arrangements, given the need for primary legislation. Transitional
arrangements, which interface with the new English regulator will ensure
stability in the intervening period.
11. The Commission recommends the Drinking Water Inspectorate (DWI)
continues to operate across Wales and England, reporting to the Welsh
Ministers and Defra Secretary of State. The DWI commands significant
public respect and maintaining a Wales and England basis would support
ongoing confidence in drinking water. These functions are clear, scientific
and evidence based.
Regulation
12. The economic regulator for Wales would perform a supervisory
function to better oversee the performance and improvement of Welsh
water companies.

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13. With respect to environmental regulation, the Commission proposes that
NRW requires stronger environmental oversight in the following areas:
• reforming monitoring practices, including operator self-monitoring;
• improving regulatory oversight of sludge using the environmental
permitting regulations;
• expanded enforcement powers; and
• improved capacity and capability to support improvements.

14. The Commission concludes the system for drinking water regulation is
delivering high-quality outcomes, but a review of drinking water
standards would ensure continued provision of high-quality drinking
water, considering emerging risks. The Commission also consider the DWI
should have powers to cover all third-party operators.
15. With respect to water resources, around 95% of Wales’ water supply
comes from surface water, with only 5% from groundwater. Wales must
therefore capture and store much of its water supply. However, the UK
Climate Change Risk Assessment1 warns that rising temperatures will likely
increase consumer demand and evaporation from reservoirs. This highlights
the need for Wales to invest in resilient water infrastructure and long-term
planning. Furthermore, the Commission notes that:
• current measures to identify and repair leaks should continue to be a
primary focus for water companies
• regulation of water abstraction activity should also be strengthened
• household consumption and demand needs to be reduced, and the
Commission recommends introducing compulsory smart metering in a
greater range of circumstances
• Measures to reduce non-household consumption should be introduced,
including removing regulator barriers to water re-use.

16. With respect to Welsh consumers, the Commission believes they are
still not adequately protected. The Commission’s recommendations for an
enhanced customer experience metric will enable the regulator to better hold
companies to account to deliver high standards of customer service. The
Commission also recommends the Welsh Government reviews social tariff
schemes in Wales and considers reforms to ensure these are adequate to
support those facing water poverty. Consumer protections will be further
strengthened through the creation of a mandatory ombudsman for water for
England and Wales.

1 UK Climate Change Risk Assessment: Summary for Wales, UK Climate Risk

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Water Company Governance & Competition
17. Wales is primarily served by Dŵr Cymru Welsh Water, a not-for-
dividend company owned by Glas Cymru. The remainder of customers
are served by Hafren Dyfrdwy, a small private water company which is part
of the larger, England-based Severn Trent Group. As a result, the public
debate in Wales does not focus on for-profit water company models of
ownership. However, the Commission believes all water companies need to
be managed according to higher standards of corporate governance. A new
regime for senior water company individual accountability should be
established by the Welsh government.
18. The Commission recognises the Welsh Government's concerns around
fragmentation from competition initiatives. While the Commission is
recommending reform to support the BRM and NAV market in England, the
Welsh Government may wish not to pursue these reforms.
National Infrastructure
19. The UK and Welsh governments will need to work collaboratively to
ensure infrastructure decisions include Welsh priorities.
20. Statutory resilience standards, covering system, infrastructure and
supply chains, should be developed and adopted for the water industry
in Wales. Resilience standards should ensure all companies make forward-
looking, long-term assessments of their systems and assets and of their
ability to recover from disruption to their network.
21. The Welsh Government should strengthen the requirements on
companies to map and assess the health of their assets, and the
regulator should ensure metrics for asset health are sufficiently forward
looking.
22. The National Infrastructure Commission for Wales (NICW) is currently
reviewing water infrastructure needs for Wales and the Commission
recognises that decisions on infrastructure and asset health should be taken
forward by the Welsh Government with consideration to NICW’s findings.

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What the recommendations mean in practice
There are 88 recommendations in this report. Given the length and depth of the
report, the Commission has set out key outcomes we would expect for a) consumers
b) the water environment c) investors and d) water companies. These explain what
the recommendations mean in practice for different groups.
Consumers
Consumers should have a stronger voice in shaping the future of their water
environment. They should feel that local voices that represent them are heard in
decisions, such as where new infrastructure is built or how pollution from different
sources is tackled. They should know there is a joined-up, cross-sectoral approach
to address water issues in their area, with the nine new regional water authorities
bringing together representation from local government, agriculture, public health,
the environment and consumers (Chapter 2).
As billpayers, there should have a mandatory water ombudsman service to give a
clearer route to resolving complaints. National social tariffs should provide fair,
consistent support for low-income customers who are unable pay their bills (Chapter
5).
Consumers should be reassured that senior managers in water companies are
required to consider the public interest, and that regulators have the right resources,
culture and powers at their disposal to ensure they do (Chapters 4, 5 and 6).
Critically, they also should know that the bills they are asked to pay are fair for the
improvements being made and the services they receive (Chapter 5).
The water environment
The water environment will benefit from a radical overhaul of the water planning
system, ensuring all sectors responsible for pollution (for example, water companies,
agriculture, transport) play their part and are held accountable. It should mean that
decisions on the improvement and management of water systems – our river basins,
coasts and aquifers – pull in the same strategic direction, while reflecting regional
and local priorities (Chapter 1, Chapter 2).
At every stage, water should be protected through a strong legislative framework
which is ambitious, transparent and drives improvements in both public health and
the environment (Chapter 3). It should be protected through a more coherent and
robust regulatory framework, with confidence that the regulators can and will take
action if environmental standards are not met. This includes significant reforms to
Operator Self-Monitoring, with greater use of digitalisation, automation and third-
party assurance (Chapter 4, Chapter 5). Similarly, there should be a stronger grip
on the state of water assets and the regulatory incentives in place to improve them
(Chapter 7).

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Finally, the environment will benefit from stronger controls in how water companies
are governed, who owns them and how they are acting in line with the public
interest. It will also benefit from a sector that can attract investment for the long-term
and harness the innovation to improve it. (Chapter 6).
Investors
Investors should feel confident that, by investing in the water system and putting
their capital at risk, they are investing in an industry that has a clear, stable and long-
term framework (Chapter 1). They should know that the government has an
objective to restore the stability of the regulatory framework with reference to its
credit rating and broaden its narrative regarding water sector performance (Chapter
6).
They should be assured that the companies they invest in are regulated in an
efficient, stable and predictable way that recognises each company’s individual
circumstances (Chapter 4, Chapter 5). They should know that the regulator has a
duty to support the investability of the sector (Chapter 4). They should believe that
they can earn a fair, balanced return. Through a new financial supervision
framework, they should know that the companies they invest in are resilient and able
to absorb shocks (Chapter 6).
They should know that the workforce and supply chains are in place to facilitate the
projects. And they should know there is strong regulatory oversight to ensure they
will be delivered on time (Chapter 2, Chapter 5, Chapter 7).
Taken together, the recommendations are intended to help attract investors that take
a long-term, low-risk and low-return investment approach, for example, pension,
sovereign wealth and infrastructure funds
Water companies
Water companies should be in no doubt about the culture they are expected to set
for the public interest. That includes reforms around governance, a new regime for
senior managers and greater oversight of company finances (Chapter 6). They
should be clear about the government’s long-term priorities for water and their own
obligations with regards to their customers, the environment and the maintenance
and resilience of their infrastructure, from pipes to pumping stations to treatment
works (Chapter 1, Chapter 7).
A simpler business planning process should consolidate the 9 existing plans into 2
key frameworks (‘Water Environment’ and ‘Water Supply’), with stronger cost-benefit
analysis from regulators in how these are assessed (Chapter 2, Chapter 3). A single
integrated regulator should clarify and simplify the regulatory framework (Chapter 4).
Through the new supervisory model, they should feel there is a deeper, more tailored
understanding from the regulator about their specific circumstances, with the right
incentives in place (Chapter 5). And by devolving from the Environment Agency to

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new regional water authorities to develop water investment plans that reflect local
needs and local voices, water companies should get a clear view of coordinated
action from all sectors impacting water (Chapter 1).

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Chapter 1: Strategic direction for the water system
1.1: Government strategic direction
Background
1. The pressures and demands on water in England and Wales come from
multiple and competing directions: pressures to preserve and restore this
vital part of our natural environment; demands to take water out of the
system for households, agriculture and industry and to manage wastewater;
and demands for safe, healthy water bodies for recreation and wellbeing.
2. The management of these competing demands and pressures has
developed piecemeal over many years, often in sectoral or policy silos.
But as demands and pressures have grown our ability to manage and
balance the pressures and demands in this way have increasingly fallen
short.
3. The management of water has to balance multiple policy objectives.
Abstraction of water, for example, is vital for economic growth and
development.2 The UK Government has aimed to build 1.5 million homes in
England over the course of this Parliament and the Welsh Government has
an ambition to build 20,000 new low carbon social homes – all of which will
require water. 3 Water scarcity has been a limiting factor in relation to
development. For example, Cambridge is a targeted growth area but is also
an area where water supply relies on rare, protected chalk aquifers. The
Environment Agency (EA) has said development must not increase
abstraction and risk deterioration to these water bodies.4 Government’s
Artificial Intelligence (AI) Strategy and Net Zero Strategy also have high
water needs but there is a high degree of uncertainty, and they are not
adequately covered in current water resource planning.5 Major investment
and changes in consumer behaviour can help to resolve these tensions. But
investment costs can be high and often have to be paid for through water
bills. Consumers, used to relatively cheap and plentiful water, are resistant to
higher bills.6

2 Environment Agency, ‘National Framework for Water Resources’, 2025
3 Prime Minister’s Office, ‘Plan for Change’, 2024; Llywodraeth Cymru Welsh Government
‘Programme for government: update’, 2021
4 Defra and Ministry of Housing, Communities & Local Government, ‘Addressing water scarcity in
Greater Cambridge: update on government measures’, 2024
5 Department for Science, Innovation and Technology and others, ‘National AI Strategy’, 2022;
Department for Energy Security and others, ‘Net Zero Strategy’, 2022; Environment Agency, ‘National
Framework for Water Resources’, 2025
6 If the effect of inflation is removed, water bills have reduced nearly every year since 2014. However,
water bills are expected to rise in Price Review 2024; CCW ‘Understanding consumer priorities 2025’,
2025

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4. The management of water also has to operate across multiple
economic sectors. As shown in Figures 1 and 2, agriculture has the most
significant environmental impact on water bodies in England and Wales.
Nutrient pollution from farming can damage water body health by causing
algal blooms, oxygen depletion, and habitat destruction.7 The River Wye is
an example of this, where over 70% of excess nutrients and sediment in the
English stretch of the river have been identified as entering from agricultural
land.8 The water industry is the sector with the second most significant
impact on water quality. Both treated and untreated sewage can impact
water bodies by introducing chemicals, pathogens, or nutrients, such as
phosphorus. Urban and transport sectors are the third highest sector of
impact. Road run-off contains the build-up of pollutants from oil spills and
tyre and brake wear of vehicles on roads. These pollutants accumulate,
particularly in dry periods, and are then washed into nearby rivers when it
rains, posing risks to river ecological health and aquatic life.9
5. Environmental, demographic and financial pressures on the water
system are only growing. By 2025, the National Infrastructure Commission
(NIC) estimates there is a 1 in 4 chance that large numbers of households in
parts of England will have their water supplies cut off for an extended period,
due to severe drought.10 There is also an emerging awareness of
contaminants, such as per-and poly-fluoroalkyl substances (PFAS) (‘forever
chemicals’) and microplastics, entering our waterways.11 All of these
pressures and differing demands on the water system create a complex
landscape for the management of water.

7 Environment Agency, ‘2021 river basin management plans’, 2019
8 Defra, ‘Farming rules for water’, 2017; Defra, ‘River Wye Action Plan’, 2024
9 Mayor of London, ‘Road runoff water quality survey’, 2019
10 National Infrastructure Commission, ‘Preparing for a drier future (archived content)’, 2018
11 Defra, ‘Plan for Water’, 2023

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Figure 1 - Percentage of water bodies impacted environmentally by sector,
England, 2019

SourceIndependent Commission analysis12
Figure 2 - Percentage of water bodies impacted environmentally by sector,
Wales, 2019

SourceNatural Resources Wales data13

12 Figures are taken from the 2019 set of probable and confirmed reasons for not achieving good
status (RNAGs), linked to 2016 Water Framework Directive classifications. Percentages are based on
the total number of water bodies in England, not just those not achieving good status. Information and
data: 25 YEP B3 evidence pack
13 Analysis provided directly to the Independent Commission by Natural Resources Wales. Data from:
Natural Resources Wales
0%
2%
3%
3%
6%
8%
14%
18%
23%
44%
45%
0% 10% 20% 30% 40% 50%
Waste treatment and disposal
Navigation
Mining and quarrying
Recreation
Industry
Domestic general public
Local and central government
Urban and transport
No sector responsible
Water industry
Agriculture and rural land management
% of water bodies impacted by each sector
Sectors indentified as impacting
water bodies
0%
0%
1%
1%
1%
2%
5%
5%
7%
11%
16%
23%
0% 5% 10% 15% 20% 25%
Waste treatment and disposal
Recreation
Navigation
Hydropower
Local and central government
Domestic general public
Industry
No sector responsible
Mining and quarrying
Urban and transport
Water industry
Agriculture
% of water bodies impacted by sector
Sectors identified as impacting water bodies

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6. The UK and Welsh government have, more recently, attempted to
provide comprehensive guidance to help manage the demands and
pressures facing the water system. The Water Strategy for England
(2008) set out actions to improve the management of water across the
issues of water supply, demand, pollution and flooding.14 The Water for Life
White Paper (2011) sought to describe a ‘vision for future water
management’ in England.15 The Water Strategy for Wales (2015) set out
policies and principles towards the aim of integrated and sustainable
management of water over a 20+ year period.16 More recently, the UK
Government’s Plan for Water (2023) set out goals, targets and policies
across activities impacting water.17 The Environmental Improvement Plan
(EIP), also published in 2023, set out policies to achieve the Environment Act
2021 long-term water targets.18
7. Alongside these strategies, government and regulators have set a
range of additional requirements. In England, for example, these include
targets in the Storm Overflows Discharge Reduction Plan and the EA’s
National Framework for Water Resources.19 In Wales, the Well-being of
Future Generations (Wales) Act 2015 places duties on public bodies in
Wales to act in accordance with the sustainable development principles.20 It
has led to further targets for the water industry, such as storm overflow
targets (through the Better River Quality Taskforce Action Plans), and
phosphorus reduction targets for Special Areas of Conservation (SAC)
rivers.21
Issues
8. The Commission has identified 7 main issues in relation to government
strategic direction:
• a lack of a systems-based approach
• a lack of a cross-sectoral approach
• not sufficiently long-term

14 Defra, ‘Water strategy for England – ‘future water’, 2008
15 Defra, ‘Water for life’, 2011
16 Llywodraeth Cymru Welsh Government, ‘Water Strategy for Wales’, 2015
17 Defra, ‘Plan for Water’, 2023; Llywodraeth Cymru Welsh Government ‘Water Strategy for Wales’,
2015; Defra, ‘Environment Improvement Plan’, 2023
18The 4 statutory Environment Act 2021 targets to 1. reduce water demand, 2. reduce nutrient
pollution from wastewater 3. reduce nutrient pollution from agriculture, and 4. to reduce pollution from
abandoned metal mines
19 Environment Agency. ‘National Framework for Water Resources 2025’, 2025
20 Well-being of Future Generations Act 2015 - Future Generations Wales
21 Llywodraeth Cymru Welsh Government, ‘Wales Better River Quality Taskforce’ (viewed 16 July
2025)

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• limits in short-term direction
• a lack of progress reporting
• a lack of robust cost-benefit analysis
• a lack of clear guidance on how to manage trade-offs.
Lack of a systems-based approach
9. Despite these efforts, the Commission has heard that approaches to
strategic direction for water in England and Wales have not been
sufficiently integrated, or systems-based. Responses to the Call for
Evidence highlighted that the most recent UK government strategy
documents for water, the Plan for Water and the EIP, set individual, siloed
targets with limited consideration of their interaction.22 The Welsh 2015
Water Strategy took a more integrated approach, but there has been no
reporting on progress since 2016, meaning it is hard to evaluate delivery
against the strategy.23 The Commission has also heard that previous efforts
to establish strategic direction for the water system have had major gaps.
Some have suggested they have not sufficiently focused on recreational use
of waters, while others have called for a more holistic approach to managing
rainwater as a drainage issue. 24
Lack of cross-sectoral focus
10. The Commission has heard existing strategic government direction in
Wales and England does not appear to have taken a sufficiently cross-
sectoral approach. As described previously, the evidence shows that action
by the agricultural and transport sectors is critical to restoring environmental
health in water bodies. However, the Commission has heard action has been
lacking.25 The Office for Environmental Protection (OEP) said effective
implementation “will depend on an approach that effectively looks at and
addresses all pressures from all sectors”.26 The Commission has heard that
failures to take a cross-sectoral approach to water are also making delivering
wider government objectives harder and more inefficient. The EA recently
predicted that by 2055 England will need an extra five billion litres of water
each day just to serve the population.27 This forecast does not include new
or emerging demands associated with wider public policy objectives, such as
the water needed for both the transition to delivering the UK government’s

22 Engagement with the Commission, 2025
23 Llywodraeth Cymru Welsh Government, ‘Water Strategy for Wales’, 2015
24 Environment Agency engagement with the Commission, 2025
25 Engagement with the Commission, 2025
26 Office for Environmental Protection response to the Call for Evidence, 202527 Environment Agency,
‘National Framework for Water Resources’, 2025
27 Environment Agency, ‘National Framework for Water Resources’, 2025

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clean energy superpower mission, or the likely water needs of AI.28 Water
and wastewater services are also essential infrastructure services to enable
the UK Welsh government’s aims for housebuilding.29
Lack of enduring vision with long-term focus
11. Concerns have been raised that the approach of government is not
sufficiently long-term. UK and Welsh governments’ efforts to set strategic
direction for the sector, described previously, have been largely sporadic and
have rarely endured beyond the term of the government that was
responsible for publishing them. In England, the Plan for Water had few
measurable long-term milestones and made no provision to be binding on
future government. While the EIP does include long-term milestones, it is not
aligned with the water industry Price Review cycle, which has limited its use
to drive water industry investment. United Utilities has said “…there is a
need for stability and timeliness of government policy and guidance from
regulators. Fluctuations in the programme of work create ambiguity in
delivering statutory duties and funding uncertainty.”.30 Respondents to 38
degrees and Surfers Against Sewage consultations emphasised a lack of
confidence that government’s long-term vision reflects the needs and
ambitions of the sector and the public.31 Natural Resources Wales (NRW)
said in their response to the Call for Evidence, “…going forward we would
encourage the Commission to consider a framework which allows an
integrated approach to setting direction, for a period extending beyond the
next Price Review. This would enable a longer-term planning and investment
cycle and could facilitate more integrated solutions which provide multiple
benefits”.32
Limits in short-term direction
12. Where long-term targets have been set, the Commission has heard
how the lack of interim milestones has resulted in backloading of
delivery and made it harder for regulators to hold sectors accountable
for their progress in delivery. This is an issue illustrated by the profile of
expenditure on environmental enhancement over recent price reviews.
Figure 3 details that, in 2022-23 real terms, the Water Industry National
Environment Programme (WINEP) averaged £5.4 billion in the Price
Reviews from 2004 to 2019, before jumping fourfold to almost £24 billion in

28 Prime Minister’s Office, ‘Plan for Change’, 2024; OECD, ‘How much water does AI consume?’,
2023; Environment Agency, ‘National Framework for Water Resources: 2025’, 2025
29 Prime Minister’s Office, ‘Plan for Change’, 2024; Llywodraeth Cymru Welsh Government,
‘Programme for government: update’, 2021
30 United Utilities response to the Call for Evidence, 2025
31 38 degrees and Surfers against Sewage responses to the Call for Evidence, 2025
32 Cyfoeth Naturiol Cymru National Resources Wales response to the Call for Evidence, 2025

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Price Review 2024.33 It is further illustrated through water supply – no new
reservoirs have been built for over 30 years, but 9 new reservoirs are now
suddenly to begin as part of Price Review 2024.34 Further, the Commission
has heard that a lack of interim targets for the water system has contributed
to the lack of progress on the Good Ecological Status (GES) objectives set
by the Water Framework Directive (WFD) Regulations regarding water
quality. In England, the OEP have recommended ‘SMART interim targets on
the trajectory to meet long-term targets. These should be pursued through
specific and timebound delivery plans, accompanied by review
mechanisms’.35
Figure 3 - Estimated historical environmental expenditure allowances Water
Industry National Environment Programme (WINEP), England and Wales, 1989
to 2030, £billion, 2022-23 prices

SourceOfwat36
Lack of progress reporting
13. The Commission has heard that a lack of reporting requirements has
limited government’s ability to monitor and ensure short-term progress
to support delivery against long-term goals. As with the Wales Water
Strategy 2015, the UK Plan for Water 2023 has no associated progress
reports.37 While the EIP does provide annual reports, which cover some
water targets, it does not report against wider water requirements.

33 2022/23 prices. Ofwat engagement with the Commission, 2025
34 Defra, ‘Government steps in to build first major reservoirs in 30 years’, 2025
35 Office for Environmental Protection response to the Call for Evidence, 2025
36 Ofwat analysis provided directly to the Independent Commission. Only high -level figures are
available for early price controls. For Price Review 2014 Ofwat did not provide separate WINEP
allowances as they provided overall total expenditure allowances. For this period company business
plan requests were used to estimate the scale of the WINEP. Figures have been indexed by CPIH.
37 Defra, ‘Plan for water’, 2023
5.8 10.5 8.7 5.7 5.1 5.0 5.7
23.9
1989
1994
1999
2004
2009
2014
2019
2024

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Stakeholders have highlighted that neither English nor Welsh strategic
direction provides consistent SMART (Specific, Measurable, Achievable,
Measurable and Time-bound) targets, making it harder to measure progress
and hold actors accountable for delivery in the short and long-term. Wildlife
and Countryside Link noted that a core part of the government’s role is
setting “clear, specific and measurable delivery pathways for how…targets
will be achieved”.38
Lack of costings
14. The Commission has heard, in England and Wales, that there has been
a failure to consistently analyse the costs and benefits of the
legislative and regulatory requirements which underlie all strategic
documents and planning.39 While assessments are typically carried out for
individual policy areas, they are not always carried out for strategy
documents. This means there is rarely a cumulative assessment of the
impacts of government policies on the sector. For example, the UK
government’s Plan for Water was not subject to a robust assessment. This
has resulted in policies being imposed on the sector, with costs passed
through to consumers and the public, without a good understanding of the
cumulative impact of these policies. Ofwat noted, “in many cases, plans are
set without meaningful public consultation and in silos, with no assessment
of how to maximise their aggregate impacts at the lowest costs.”40 This was
also noted by the National Audit Office (NAO) in their recent review into the
water sector: “Defra set… targets without direct consideration for consumer
bills or affordability. In its accompanying impact assessment, Defra stated
that funding will be negotiated between water companies and Ofwat and
costs … [will be] passed on to customers in their bills.” The NAO continued,
“[Defra] did not attempt to quantify these costs. Defra also did not consider
the availability of a supply chain and deliverability of the targets.”.41
Prioritisation and trade-offs
15. The Commission has heard government has not provided clear
prioritisation or direction to the regulators on how to navigate trade-
offs between goals. The Commission has heard clearly from regulators that
they are not getting the vital strategic direction they need to manage the
sector and deliver government’s priorities, particularly how the regulatory
system should balance affordable bills for customers with enabling water
companies to deliver the investment needed to meet required environmental
standards. Water UK said that responsibility for making trade-offs “should not

38 Wildlife and Countryside Link and Blueprint for Water response to the Call for Evidence , 2025
39 Engagement with the Commission, 2025
40 Ofwat response to the Call for Evidence, 2025
41 National Audit Office, ‘Regulating for investment and outcomes in the water sector’, 2025

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sit with an independent regulator but with an elected government who can
give expression to the needs of society”.42 Water regulators have been clear
that exercising greater discretion requires the statutory space to do so and
clear articulation from government of their desired outcomes.43 Ofwat has
said it is key that clarity on trade-offs is provided “early in the strategic
planning process lifecycle to enable plans to be developed”.44 Natural
England (NE) has also supported greater clarity on trade-offs: “policy and
ambition are currently set at national level but there is no integrated plan that
enables priorities to be cross-checked, integrated and trade-offs made.”45
Conclusions and recommendations
Clarity is needed from government on a strategic approach for the water
sector.
16. To deliver positive long-term water outcomes for the environment,
citizens and economic growth, it is essential there is a step change in
government’s strategic approach to water. At present, the issues facing
the sector are resolved by the unplanned – and often unintended – interplay
between siloed guidance and policy, as well as over-lapping and under-
lapping legislative requirements. Strategic guidance is key to equip the
regulators with the tools they need to properly provide oversight. Providing
such guidance will be a major and by no means an easy exercise. It
necessarily involves interdepartmental consultation and coordination and the
balancing of different objectives and interests. It must be comprehensive,
cross-sectoral, and must command the confidence of the water users as well
as the sectors impacting the water system.
Recommendation 1: The UK and Welsh government should each bring forward
a new, long-term, cross-sectoral, and systems-focused National Water Strategy
for England and Wales respectively.
Scope
17. The scope of the National Water Strategy should be sufficiently broad
to overcome the siloed approaches historically seen in the water
sector. Firstly, it should take an integrated approach to setting targets and
direction, across the whole water system and its interdependencies. This
includes water supply and resources, drainage, wastewater, public health
and recreation needs, interactions with flood risk and the wider environment,
including Net Zero.

42 Water UK response to the Call for Evidence, 2025
43 Regulator engagement with the Commission, 2025
44 Ofwat response to the Call for Evidence, 2025
44 Ofwat response to the Call for Evidence, 2025
45 Natural England response to the Call for Evidence, 2025

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18. The Strategy should be cross-sectoral, setting out in one place the
requirements on all the sectors impacting on or interacting with the
water environment. As part of this, the Strategy should set out what existing
levers and additional mechanisms are needed to mitigate the impact of key
sectors, including agriculture (further detail in Chapter 2). To achieve clean,
plentiful and resilient water multiple sectors must deliver their part – long-
term objectives cannot be delivered by the water industry alone. In recent
years, the water industry has put forward significant investment plans to
reduce pollution. However, achieving a future environmental target for water
– as set out in Chapter 3 - will depend more and more upon reducing the
contribution of agricultural pollution.46 This is especially true in Wales, where
National Resources Wales (NRW) has identified that 61% of water bodies in
SACs failed phosphorus targets, with this closely linked to agriculture
production.47 Action by other sectors is also needed, for example to improve
drainage and management of surface run-off from roads and urban areas. A
National Water Strategy should therefore include the impact of agriculture,
land-use, energy, transport and housing development, and any other sectors
that are particularly reliant on or impact the water system. In Wales, the
inclusion of the mining sector is particularly important.
19. The National Water Strategy should consider relevant milestones
within other interdependent strategies that have a bearing on the water
system, including flood planning, climate and adaptation strategies, the
Net Zero Strategy, the Environment Improvement Plan and the 10 Year
Infrastructure Strategy. A truly cross-cutting water strategy would enable
water interdependencies between government policy objectives to be
recognised and addressed and ensure that water is adequately factored into
policy thinking across government. When setting the strategy, government
should also aim to align and, or replace wider planning documents in water
with the National Water Strategy.
Priorities and trade-offs
20. The National Water Strategy should set out a clear framework for
prioritising and managing trade-offs. Government should look to domestic
and international regulated sectors to decide how best to design this. There
are a number of ways this could be articulated and examples that could be
drawn upon. These include tiered objectives, a hierarchy of outcomes, and
national guidance on areas of conflict. Box 1 sets out a range of
suggestions.

46 Environment Agency engagement with the Commission, 2025; expanded on in Chapter 3
47 In 107 of 125 water bodies assessed with 18 water bodies not being assessed due to inadequate
data. Cyfoeth Naturiol Cymru Natural Resources Wales, ‘Compliance Assessment of Welsh River
SACs Against Phosphorus Targets’, 2021

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48 Bank of England ‘Prudential Regulation Authority Business Plan 2023-24’, 2023
49 New Zealand Ministry for the Environment, ‘National Objectives Framework’, 2022; Ministry for the
Environment, ‘Clause 1.3: The fundamental concept of Te Mana o te Wai and its use in the NOF ’,
2022
Box 1 – Case study: Methods for supporting prioritisation and the
management of trade-offs to achieve government targets
Tiered objectives
This would involve articulating primary objectives in the National Water Strategy,
alongside secondary objectives, and lastly areas to which delivery partners must
have regard. Such an example can be seen in the functioning of the Prudential
Regulation Authority (PRA), which has two primary objectives, two secondary
objectives, then finally recommendations from HM Treasury which they must have
regard to when carrying out their function. These objectives and recommendations
guide the development of standards and policies that set out the expectations of
firms, with strategic priorities reviewed and announced yearly.48
Hierarchy of outcomes
A precedent for this can be found in the Te Mana o Te Wai hierarchy, within the
National Objectives Framework of the Ministry for the Environment in New
Zealand. Te Mana o Te Wai refers to the vital importance of water. When managing
freshwater, it ensures the health and well-being of the water is protected and
human health needs are provided for before enabling other uses of water. This
hierarchy is applied to all decision-making and prioritises the health and well-being
of water bodies and freshwater ecosystems first. The second priority is the health
needs of people (such as drinking water). The third priority is the ability of people
and communities to provide for their social, economic and cultural well-being, both
now and in the future.49 While the Commission does not necessarily recommend
introducing this specific hierarchy within England and Wales, the government
should consider whether a similar approach may enable a clearer articulation of
priorities to the water sector and allow better decision-making on trade-offs.
Te Mana o Te Wai does not require all activities to come to a halt, nor that all water
bodies must be restored to a pristine state before other needs in the hierarchy can
be addressed (for instance, drinking water). However, it requires decision makers
to understand existing pressures and prioritise the hierarchy based on the current
state and also requires that decisions are made that provide for activities without
detracting from Te Mana o Te Wai. In degraded water bodies this will require
changes to current resource use, to restore Te Mana o Te Wai. New development
may proceed but in a way that gives effect to Te Mana o Te Wai. This means
economic gain, urban development or lifestyle activities cannot come at the
expense of the health of a water body.

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21. The Well-being of Future Generations (Wales) Act 2015 and the
Environment (Wales) Act 2016 may already provide a framework for
Welsh ministers (and other named public bodies) through which to
consider trade-offs in a long-term context.52 Welsh Government’s Price
Review Forum has also been successful in navigating some trade-off
decisions for the water industry during Price Review 2024.53 Other tools
used by the Welsh Government include Habitats Regulation Assessments,
Strategic Environmental Assessments and Equality Impact Assessments
when considering the socio-economic impacts of policy decisions (for
example, previous decisions on social tariffs).54 Welsh Government should
also consider how it can better articulate cross-sector trade-offs. This may
include expanding the membership of the Price Review Forum to include
representation from other sectors.
22. Alongside a framework within the National Water Strategy, government
should also develop a clear escalation route to support managing

50 Frontier Economics, ‘Dry Down Under: Australia’s water woes’, (viewed 16 July 2025)
51 German National Water Strategy, ‘National Water Strategy - Cabinet decision of 15 March 2023’,
2023
52 The Well-being of Future Generations, 2016; Environment (Wales) Act, 2016
53 Engagement with the Commission, 2025
54 Llywodraeth Cymru Welsh Government engagement with the Commission, 2025
An additional example of this approach has been taken in Tasmania. Here, public
health issues from water supply were deliberately prioritised over the
environmental impacts to deal with water quality issues. There was the ability to
deviate from the hierarchy where there was critical need to do so - the
environmental regulator was explicit in outlining that TasWater should focus on
areas with significant public health issues, rather than areas that may be non-
compliant with a lower risk of environmental damage. There was also spatial
prioritisation of investment into areas it was deemed to have the most value.50
National guidance for areas of tension
UK and Welsh governments may also consider releasing specific national
guidance for likely areas of tension. This approach has been adopted in Germany,
where the German Government have devised national agreed criteria for existing
and future conflicting objectives in land-use (for example, appropriate areas and
sites for groundwater recharge, drinking water abstraction, flood protection, use for
energy production) to be solved at the regional level.51 A National Water Strategy
could outline where these areas of guidance are likely to be needed and what
criteria should be applied by regulators and, or, systems planners to their decision-
making on these trade-offs. This could include guidance on where regulators and
systems planners may need to exercise constrained discretion, as outlined in
Chapter 3.

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unforeseen policy conflicts and trade-offs where necessary. Wherever
possible, resolving conflicts and trade-offs should be made by regulators
within the priorities and trade-off decision making framework set in the
National Water Strategy and the Ministerial Statement of Water Industry
priorities (MSWIP) (further information provided in Section 1.2). However,
government may not anticipate every circumstance that will occur; or its
decisions may become inappropriate. Further, as suggested by the National
Infrastructure Commission (NIC) in their report on supporting resilient
infrastructure, government may not always be comfortable providing ex ante
guidance to the regulator without the regulator providing information on the
context and potential impacts of different choices. For example, the UK
Government takes decisions on climate change targets alongside
independent expert advice from the Committee on Climate Change. To
provide this escalation route, government should adopt the NIC’s
recommendation – giving regulators the power to seek explicit guidance on
policy conflicts and trade-off decisions from ministers, against a menu of
feasible options provided by the regulator alongside detailed impact
assessments.55
Timing
23. The National Water Strategy should be published every 5 years.
Publication should line up with the Price Review cycle, ensuring that the
Strategy arrives early enough to guide water industry planning and there are
strong arguments that it should be provided no later than the end of first year
of the Price Review cycle. Once published, the Strategy should not be
revisited until the 5-year period has passed, unless a serious case can be
made, (for example a major change of policy, or general election) and due
process followed. Government may wish to look to legislation for the
Strategy and Policy Statement for Energy - the Secretary of State is
required by legislation to review the statement within a set period - no more
than 5 years since the last review should elapse, though the statement can
be reviewed before that under certain conditions, such as if there has been a
general election or significant change in energy policy.56
24. The National Water Strategy should have a minimum horizon of 25
years to ensure an adequate long-term perspective. It should set out
clear interim milestones on a 5/10/25 year basis to align with Price Review
planning horizons. The strategy should constantly roll forward every 5 years,
so that there is always a 25-year end point. Furthermore, the National Water

55 National Infrastructure Commission, ‘Strategic Investment and Public Confidence (archived
content)’ 2019
56 Energy Act 2023

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Strategy should act as the driver for all aspects of water planning, including
regional and company planning.
25. At each 5-year review and revision, the government should consider
what adjustments need to be made to delivery trajectories, milestones
or interim targets. Any revision should be made with consideration of
supporting progress towards long-term targets. This may include considering
if new long or short-term targets are needed, to ensure the sector is always
clear on the long-term direction. What the review and revision should not
mean is that legislative deadlines, (for example the date to complete the
primary long-term target), are being moved back or constantly changed, as
this would only cause further instability and prevent the delivery of long-term
goals. If a future government does believe a change to a legislative deadline
is required, this should only happen where there is a serious case to be
made and where due process has occurred.
Legal basis
26. The National Water Strategy should have a statutory underpinning in
England and in Wales. The English Strategy should be led by Defra and the
Welsh Strategy led by the Welsh Government department for Climate
Change and Environmental Sustainability. However, they should provide a
whole government vision for water - its contents and priorities should
therefore be endorsed by all relevant government departments. The Defra
Secretary of State and Welsh ministers should have a legal requirement to
produce and maintain the strategy in line with certain statutory criteria or
principles. This would support the strategy’s longevity for future government.
Each iteration of the report should be laid before parliament and the Senedd.
27. In England, the Strategy should look to the broad model of the EIP, as
provided for in the Environment Act 2021. The EIP is a plan for
significantly improving the natural environment over a period of at least 15
years. It must be produced and published by the Secretary of State,
reviewed at least every 5 years, and progress reports must be published
annually. The EIP brings together a suite of long-term and short-term targets
focused on improving the natural environment. The long-term targets are set
in secondary legislation under the Environment Act, while interim targets are
set through reviews of the EIP. Changes to the long-term targets are
possible, but conditions have to be met to avoid ‘goalposts’ constantly
shifting.
28. As recommended in Chapter 3, a review and rationalisation exercise of
the legislative framework for water should include a review of all water
statutory targets across existing requirements and legislation.
Government should assess the costs and benefits and consider which
overarching outcomes may particularly benefit from the additional backing

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for investment, and the long-term certainty across political cycles, which
statutory targets provide. The National Water Strategy would then bring
together all requirements for the sector in one strategic, cross-sectoral
document. It would set out delivery targets to meet overall statutory targets,
as set out in legislation.
29. There should also be a legal requirement to regularly report on
progress achieved by various sectors against the targets and
objectives set in the National Water Strategy. This would require
coordination with water regulators and other government departments.
Where necessary progress is not being achieved, government should
provide a clear response. The government may wish to consider how to
make reporting information accessible for the public to support transparency
and engagement.
Box 2 – Case Study: The UK’s Net Zero strategy
The UK Net Zero Strategy is rooted in the Climate Change Act 2008, which was
amended in 2019 to commit the UK to achieving net zero greenhouse gas
emissions by 2050.57 Under this Act, the Secretary of State must lay before
Parliament a report setting out proposals and policies for meeting the carbon
budgets for current and future budgetary periods. This must be done as soon as is
reasonably practicable after setting the carbon budget for a budgetary period.
The legislation requires that the report must set out (a) the Secretary of State's
current proposals and relevant policies, (b) the time-scales over which those
proposals and policies are expected to take effect, (c) how the proposals and
policies affect different sectors of the economy, and (d) the implications of the
proposals and policies for the net UK carbon account for each budgetary period
covered by the report. No existing water strategy matches the level of detail, the
measurability of delivery, or the cross-sectoral approach taken by net zero.
The most recent Net Zero report as required under the Climate Change Act 2008
was the 2023 Carbon Budget Delivery Plan published under the previous
Government.58 There will be an updated Carbon Budget and Growth Delivery Plan
published later this year in order to fulfil the 2024 High Court judgment. 59 This
publication will set out in detail an update to the existing strategies, policies and
proposals to reach Net Zero.

57 Climate Change Act 2008
58 Department for Energy Security & Net Zero, ‘Powering Up Britain: Net Zero Growth Plan’, 2023
59 Courts and Tribunals Judiciary, ‘Friends of the Earth and others -v- Secretary of State for Energy
Security and Net Zero’, 2024

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Principles
30. Government should develop a set of high-level guiding principles that
government must give consideration to when developing the National
Water Strategy and the Ministerial Statement of Water Industry
Priorities (discussed in section 1.2). A set of agreed principles could guide
the development of these documents every 5 years, functioning as
backstops to ensure the quality of them. It is recommended that government
further refine the suggested principles below – they may choose to adjust
wording or add additional principles where they think necessary. Government
should ensure any principles set work alongside existing legislation,
including, in Wales, the Well-being of Future Generations (Wales) Act 2015.
These principles should be included in legislation.
Box 3 – Proposed Principles for National Water Strategy and MSWIP
• Resilient – support the resilience of the country’s water assets (natural and
water industry), facilitate future population and climate adaptation and
mitigation needs, by using long-term forecasts of at least 25 years.
• Long-term – long-term targets and goals, as set out in legislation and through
the National Water Strategy, should be reflected in the Strategy and MSWIP
• Targets for the environment and nature – the needs of the environment
should be reflected in the Strategy and MSWIP, and consequently in both
planning frameworks discussed in Chapter 2.
• Secure water supply – the fundamental objective of ensuring sufficient clean
drinking water supplies for now and the future.
• Coherent – other frameworks and targets and goals industry and regulators
may be subject to, such as net zero, should be reflected in the Strategy and
MSWIP
• Appraisal – Government should conduct appraisal of economic, environmental
and other costs and benefits, including using natural capital approaches. This
assessment should include impact on other sectors and should consider the
demands of individual policies and their cumulative impact.
• Affordable and deliverable – Government should use the appraisal to ensure
its requirements meet reasonable expectations of affordability and deliverability.
• Transparent – Government should provide a clear explanatory annex,
demonstrating how its short-term targets/priorities and framework for trade-offs
support delivery trajectories of long-term goals and targets.
• Informed– Government should engage early with regulators and other key
groups (such as water industry, agriculture relevant sector representatives,

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eNGOs and consumer bodies,) to support creating the targets, priorities and
trade-offs.

Consultation
31. The National Water Strategy should be subject to formal public
consultation. Objectives are most likely to be delivered if those who
implement them have had input in how they are designed. Alongside
consultation, when developing the strategy, government should build on
engagement with catchment, local and regional levels to help determine
national priorities. Particularly after the first cycle, each strategy should
iterate feedback and escalation of issues from the catchment and regional
levels, including the systems planners (see Chapter 2), local government,
catchment groups, experts, community voices, and the public.
Robust assessment
32. A new National Water Strategy should be subject to assessment. This
should include assessing costs and benefits for individual asks and for
the strategy as a total. It should include the cumulative impact on
consumers, impact on supply chains and contributions to natural capital. It
should also include impact on other sectors, such as agriculture, and impact
on other strategic goals, such as net zero or development. Government
should work with regulators, industry and other delivery bodies to support
this assessment and use the support of other bodies, such as the National
Infrastructure and Service Transformation Authority, where necessary.
Ministers should use this information to support decision making on targets
and priorities set.
1.2: Setting direction for the water industry
Background
33. Strategic Policy Statements (SPSs) were introduced through the Water
Act 2014 (amending the Water Industry Act 1991) with the aim of
supporting a more resilient, long-term water industry, in line with
government direction. Both the UK and Welsh government use SPSs to
provide strategic direction for Ofwat every 5 years, exclusively for the water
industry, ahead of each Price Review. There is no direct equivalent to the
SPSs for the other water regulators. Instead, ministers have powers to
direct EA and NE (in England) and NRW (in Wales) as to the specific
exercise of their functions – which they do on an ad-hoc, issue-by-issue
basis. The Secretary of State has a duty to consult the EA, Ofwat, Welsh
ministers, relevant undertakers, and anyone else they consider appropriate.

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Welsh ministers must also consult NRW and the Secretary of State.60 The
most recent SPSs were published in 2022 by the UK and Welsh government
to support Price Review 2024.61
Box 4 – What does strategic guidance for other utility sectors look like?
Strategy and Policy Statement for Energy – Under the Energy Act 2013, the
Secretary of State may issue a statement setting out the strategic priorities of
government for energy; the particular outcomes to be achieved to implement this
policy; and the roles and responsibilities of those in implementing the policy, or
who have functions affected by it. 62 Unlike for water, the energy statement applies
to multiple regulators and bodies - the National Energy Systems Operator (NESO)
as well as Ofgem - and sets out core roles and responsibilities for their operation.
Also, unlike the water SPS, the Secretary of State is required by legislation to
review the statement within a set period - no more than 5 years since the last
review should elapse, though the statement can be reviewed before that under
certain conditions, such as if there has been a general election or significant
change in energy policy. The legislation also sets requirements for who must be
consulted. The legislation underlying the energy statement also differs to water in
two other key ways: firstly, Ofgem has a requirement to report on its work in
relation to the statement each financial year. Secondly, Ofgem and NESO must
raise with the Secretary of State if the statement becomes not realistic to achieve
at any time. The Water Industry Act 1991 does not provide equivalent
requirements for Ofwat.
The most recent energy statement was published in 2024. At 38 pages it set out
fifteen strategic priorities with multiple policy outcomes related to these. 63 The
statement also made reference to longer term 2035 objectives for the electricity
system and net zero 2050 goals.
Scottish Water Directions – Under the Water Industry (Scotland) Act 2002,
Scottish ministers must give Scottish Water directions as to how to exercise its
powers under section 25 and Schedule 3; requiring it to promote water
conservation and water-use efficiency; and otherwise how its affairs are to be
managed and conducted. 64 Scottish Water is the sole water company in Scotland,
and is nationalised. Ministers set these ‘Directions’ every 6 years, covering a 6-
year period. Under legislation, ministers must consult Scottish Water and
Consumer Scotland in creating the Directions. The legislation also requires
Scottish Water to report in its activities each financial year.

60 Water Industry Act 1991
61 Defra, ‘Strategic Policy Statement for Ofwat’, 2022; Llywodraeth Cymru Welsh Government,
‘Written Statement: Strategic Priorities and Objectives Statement for Ofwat (SPS) ’, 2022
62 Energy Act, 2013
63 Department for Energy Security & Net Zero, ‘Strategy and Policy Statement for Energy’, 2024
64 Water Industry (Scotland) Act, 2002

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The most recent Directions were published in 2020. At 5 pages it was much more
succinct than the UK and Welsh SPS. 65 It set 40 requirements across 11 sub-
sections, which include drinking water, circular economy, and asset maintenance.
The Directions have clear links to wider strategies, such as climate change, Net
Zero 2040 and the circular economy.
Issues
34. The Commission has identified 5 main issues in relation to the
government direction for the water industry provided by the SPSs:
• Failure to support water regulators to work together
• Does not support long-term targets
• Failure to respond to emerging priorities
• Difficulties in holding stakeholders to account for delivery
• Provides no detailed guidance to help manage trade-offs
35. The Commission has heard that the SPS fails to support water
regulators to work together towards the same set of priorities. Currently
the SPS only sets Ofwat’s priorities and objectives for England and Wales,
while ministers direct the EA and NRW on an ad-hoc basis – this means
there is no single set of priorities towards which all water industry regulators
are working consistently. This contributes to a confused and sometimes
conflicting regulatory environment, making it difficult for regulators to agree
on how to manage trade-offs. The Corry Review (2025) has criticised the UK
government’s siloed approach, recommending SPSs for each regulator.66
Ofwat has also specifically called for an SPS that applies to all regulators,
which would clearly articulate what is expected of the water industry for all
regulators.”.67 The Drinking Water Inspectorate has suggested that they
should be a statutory consultee on the SPS.68
36. The Commission has heard that the SPS does not support long-term
targets. 69 Where requirements do link to long-term targets, they are often
vague on what exactly is expected in the next 5 years to support the long-
term goal. Respondents to the Commission’s Call for Evidence have argued
that this lack of clarity with regard to the longer-term risks incremental
delivery of long-term goals falling between the cracks.70 For example, neither
the 2017 nor 2022 SPSs were specific on what was needed by the water
industry to deliver against the WFD. This has contributed to issues, such as

65 Scottish Government, ‘Scottish Water Directions’, 2020
66 Defra, ‘An Independent Review of Defra’s regulatory landscape’, 2025
67 Ofwat response to the Call for Evidence, 2025
68 Drinking Water Inspectorate response to the Call for Evidence, 2025
69 Defra, ‘Strategic policy statement for Ofwat’, 2022
70 Responses to the Commission’s Call for Evidence, 2025

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the backloading of delivery by the water industry to achieve targets under the
WFD. Water industry spending on WFD associated projects doubled every
Asset Management Period (AMP) from AMPs 6 to 8 (AMP6, 2015 to 2020 -
£2.9 billion; AMP7, 2020 to 2025 – between £4.1 - £5.2 billion; AMP8, 2025
to 2030 - £9.8 billion).71
37. The Commission has heard that the SPS has also been challenged for
failing to respond to emerging priorities. For example, the UK 2022 SPS
was not updated to respond to the Levelling Up and Regeneration Act 2023
and Storm Overflows Discharge Reduction Plan, which came into effect after
the SPS was published.72 This meant regulators were left to understand for
themselves how they should balance new requirements against those set in
the UK 2022 SPS – this contributed to issues of affordability and
deliverability in Price Review 2024.73
38. The Commission has heard that it is difficult to effectively measure
progress and hold stakeholders to account to deliver against the SPS.
Both the UK and Welsh SPSs have been criticised for not providing SMART
objectives.74 The Corry Review (2025) has recommended measurable
objectives in any future SPSs. The Call for Evidence set out that
stakeholders’ struggle to assess how regulators have delivered against the
stated priorities. Ofwat has said it would like clear guidance on how to report
in a way that is seriously engaged with by Defra.75 Water UK has requested
that the SPS is precise about measures of success to help with
accountability.76 Water UK noted, “Ofwat has faced far too little accountability
for its decisions .... UK and Welsh ministers have communicated their
priorities through [the SPS] and then trusted that Ofwat would align its
activities to their priorities. There has been too little evidence of this
happening, and too little challenge when it has not.”.77
39. As with government water strategy documents more generally, the SPS
has been criticised for lacking a clear hierarchy of priorities, and
providing no detailed guidance to help Ofwat balance its objectives and
manage trade-offs. The 2022 UK SPS set 4 high-level ‘strategic priorities’,
which were broken down into around 50 specific requirements; the Welsh

71 Environment Agency and Ofwat engagement with the Commission, 2025. There is no simple way to
calculate WFD expenditure due to not recording at a driver level during previous price control periods,
and the overlap between WFD drivers and other WINEP drivers during the current price control
period. Therefore, all values are considered to be approximate, and high level.
72 Defra, ‘Strategic Policy Statement for Ofwat’, 2022
73 Environment Agency and Ofwat engagement with the Commission, 2025
74 Environment Agency, Ofwat, water company engagement with the Commission, 2025
75 Ofwat engagement with the Commission, 2025
76 Water UK response to the Call for Evidence, 2025
77 Water UK response to the Call for Evidence, 2025

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SPS set 5 strategic priorities, covering 29 requirements.78 Neither
government provided clear detailed direction on how regulators should
balance priorities or manage trade-offs.79 There is no requirement for a
robust assessment as part of the SPS, which means government guidance
through the SPS could exacerbate trade-off challenges.80 As noted above,
the water regulators have been clear that their ability to exercise greater
discretion requires clear articulation from government of their desired
outcomes. Ofwat and Water UK have argued that it is for government to
provide this direction as regulators lack the legitimacy and are also not
empowered by the law to manage trade-offs in the way needed. Water UK
has proposed that government should “provide a framework to prioritise the
delivery of goals in how the regulator should make its decisions.81 Welsh
Water has said there is “the need for the resolution of various trade-offs that
arise.... we think it is important that the government … provides the strategic
direction that defines the overall envelope of the price-service package ...”.82
Conclusions and recommendations
Strategic guidance to the water industry needs to be strengthened and
clarified.
40. The National Water Strategy recommended should address and
balance the high-level priorities and set out the high-level objectives
and targets for the management of water as a whole. But beneath and
subject to the National Water Strategy, there is a need for specific direction
for the water industry regulators. This is necessary to provide them with the
level of detailed direction they require to deliver government priorities. This
level of detail would not be appropriate for the National Water Strategy,
which is intended to be cross-sectoral and higher level.
Recommendation 2: The UK and Welsh governments should revise the legal
framework for the Strategic Policy Statement and replace this with a new
Ministerial Statement of Water Industry Priorities (MSWIP), directing all water
industry regulatory and systems planner functions.
Regulators in scope
41. In line with recommendations elsewhere in this report, (see Chapter 2
and 4) in England and Wales, the MSWIP should be directed to the

78 Defra, ‘Strategic Policy Statement for Ofwat’, 2022; Llywodraeth Cymru Welsh Government,
‘Written Statement: Strategic Priorities and Objectives Statement for Ofwat (SPS) ’, 2022
79 Ofwat engagement with the Commission, 2025
80 Ofwat response to the Call for Evidence, 2025; Water UK response to the Call for Evidence, 2025
81 Water UK response to the Call for Evidence, 2025
82 Dŵr Cymru Welsh Water response to the Call for Evidence, 2025

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regulators and systems planners, and apply to all relevant functions for
the water industry.
42. This mirrors the approach of the energy sector, in which similar
government guidance applies to Ofgem and NESO.83 It also reflects the
Corry Review (2025) recommendation that Defra should provide SPSs to all
regulators, ensuring regulators are able to work coherently together, to co-
deliver to the same set of priorities for industry.84
Time horizons and interactions with the National Water Strategy
43. The MSWIP should be published every 5 years as part of the National
Water Strategy review. It should arrive early enough to guide water industry
planning and allow regulators enough time to deliver their parts of the
planning cycle effectively. The MSWIP targets and requirements should be
dictated by the long-term goals and apportionment set in the National Water
Strategy. Any targets set out in the MSWIP would likely reiterate those
required by the National Water Strategy in the next 5 to10 years to deliver
the long-term legislative goals; however, the MSWIP should then provide the
additional, more granular detail needed by the water industry. For example,
the National Water Strategy would set out the number of pollution monitors
to be installed in the next 5 years, but priority sites for the next round of
monitor installations would be set in the MWSIP. Likewise, priority sites for a
new round of requirements under the Industrial Emissions Directive would be
set in the MSWIP , rather than, as at present, by Defra.
44. The MSWIP should take a 5/10/25 year approach in line with the
National Water Strategy and set this for planning (discussed further in
Chapter 2). The MSWIP should set out targets and requirements relevant for
the next 5-year funding period, with these acting as 5-year milestones
against longer-term delivery trajectories set out in the National Water
Strategy. The MSWIP should also provide certainty on priorities over the
medium-term, to support the system planning model set out further in
Chapter 2. To do this, the MSWIP would also set detailed targets and
requirements which cover a 10-year period. This would enable water
companies to plan on an up-to-ten-year horizon, which in turn would allow
for a more flexible approach to planning and delivery. The MSWIP may also
set targets and requirements on a longer-term horizon, where appropriate.
Trade-offs and prioritisation
45. The government should set clear priorities and a framework to guide
trade-off decisions for industry in the next funding period. The MSWIP

83 Department for Energy Security and Net Zero, ‘Strategy and policy statement for energy policy in
Great Britain’, 2024
84 Defra, ‘An independent Review of Defra’s regulatory landscape’, 2025

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should provide detailed, industry-specific guidance where government
direction is needed but the issues are too specific for the National Water
Strategy. For example, if government requires a certain number of
improvements on storm overflows, water quality monitors and bathing
waters, and, during scoping, it is found that supply chains can’t cope with the
requirements - the MSWIP would help the systems planners and regulators
decide how to prioritise. It could do this by setting a baseline for minimum
delivery across the targets and requirements, with stretch targets to be
achieved where possible. In some cases, it could guide regulators to
prioritise certain locations or consider costs and delivery chains when
installing monitors.
46. As with the National Water Strategy, where unexpected trade-offs occur
(or priorities become inappropriate), regulators should be able to seek
guidance from government within period. In this way, the MSWIP
framework should support regulators to deliver an affordable and deliverable
Price Review programme in line with government priorities.
47. The direction given through the MSWIP could also set a more detailed
framework for the Systems Planner to exercise constrained discretion
(see Chapter 2 on systems planning and Chapter 3 on constrained discretion
for further detail). The MSWIP would set the ‘what’ of delivery. The systems
planner would then identify ‘how’ to deliver within the structures and
boundaries set by the MSWIP. The systems planner would use the clear
prioritisation provided through the MSWIP to manage trade-offs between and
within targets/requirements for industry.
Targets and requirements
48. In line with the National Water Strategy, the MSWIP should set out
SMART targets, for national (and where relevant regional) water
industry priorities. Regulators would then set permit or licence conditions
to support adherence to the targets and requirements by the water industry.
As recommended by the Corry Review (2025), a SMART approach should
better allow government and regulators to assess progress and hold
companies accountable for delivery.85 Where appropriate, targets should be
outcome focused to better support innovation and allow systems planners to
use their expertise to decide the ‘how’ of delivery.86 However, given the detail
of the MSWIP, outcomes focused targets may not be appropriate for every
target; government should make a judgement call on a case-by-case basis
regarding whether outcomes or output targets and requirements are needed.
While we anticipate that most targets and requirements set out in the MSWIP
should be national, ministers should be able to include targets and

85 Defra, ‘An independent Review of Defra’s regulatory landscape’, 2025
86 Further expanded in Chapter 2

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requirements on select regional priorities, where they feel this is appropriate
and in the national interest.
Robust assessments
49. Government should assess the costs and benefits of its MSWIP and
take overall affordability into account when setting targets and
requirements. This analysis can be done as part of wider impact analysis of
the National Water Strategy. Government should then use this information to
support setting targets and requirements set out in the MSWIP – so that they
can have confidence that the MSWIP delivers what is needed for our long-
term goals, while supporting a deliverable and affordable Price Review.
50. Government should set a new duty on the regulator to raise concerns if
the MSWIP becomes undeliverable in period. NESO and Ofgem have a
duty to raise concerns if their equivalent to the SPS becomes undeliverable
at any time.87 We understand from the relevant departments that this duty
has never been used but acts as an incentive for government to ensure their
statement is a deliverable ask.

87 Energy Act 2013

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Chapter 2: Planning
Background
Current planning frameworks
51. There are several planning frameworks for water currently in place in
England and Wales, operating at different spatial scales. At the regional
level, 11 River Basin Management Plans (RBMPs), produced by
environmental regulators, set out how environmental objectives will be met in
each river basin district. They are approved by the Secretary of State. These
plans shape aspects of water regulation and planning. They describe the
types of measures that water companies should take to fulfil environmental
obligations, which then drive action through the water industry planning
frameworks described below. Water companies have a duty, every 5 years,
to produce Water Resource Management Plans (WRMPs) which set out how
they will continue to supply water in their supply area over at least the next
25 years. Regionally planned water resource solutions feed through to the
water company-scale plans that set out how public water supply needs will
be met.88 At a local level, the catchment-based approach (CaBA), launched
by Defra in 2013, provides a framework for local, cross-sector action on
water.89 CaBa partnerships bring together civil society, local authorities,
water companies and others to develop initiatives to improve the local water
environment. They are currently active in all 100+ river catchments in
England.
52. Water companies currently develop 9 separate plans as part of
business planning, covering aspects of their business ranging from
long-term water resources management to short-term environmental
protection and pollution incident reduction activities.90 In addition, water
companies collectively are required to have regard to a further 18 plans
which are not water industry-led, but which interact with their planning.
These include, for example, RBMPs, flood risk planning, local growth and
development plans, local nature recovery strategies in England, or in Wales
the nature recovery action plan.91

88 Environment Agency, ‘A summary of England’s revised draft regional and water resources
management plans’, 2024
89 See Box 2 of the Commissions Call for Evidence, 2025
90 The 9 plans water companies produce are: regional water resource management plans, WRMPs,
Drought Plans, Drainage and Wastewater Management Plans, Pollution Incident Reduction Plans,
Drinking Water Safety Plans, Water Industry National Environment Plans & National Environment
Plans, Long-term Delivery Strategy, Business Plans
91 The 18 wider plans water companies have regard to: Protected Site Strategies; Local Plans & the
National Planning Policy Framework; National Development Management Policies; River Basin
Management Plans; Storm Overflows Discharge Reduction Plan; Local Nature Recovery Strategies;
Integrated catchment management (catchment plans); Water Resources National Framework; Plan

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53. These planning frameworks collectively inform the business planning
process for each Asset Management Period (AMP). Most of what goes
into water companies’ business plans sits outside these planning
frameworks, especially base elements.92
54. Planning frameworks for sectors outside of the water industry are
sparser and vary. There are no equivalent planning frameworks for
agriculture, though the UK Government and Welsh Government have
introduced regulatory measures to mitigate and manage the impact of
agricultural pollution on water bodies. These are the Reduction and
Prevention of Agricultural Diffuse Pollution (England) Regulations 2018
(known as the Farming Rules for Water) 2018, the Nitrate Pollution
Prevention Regulations 2015 and Water Resources (Control of Pollution)
(Silage, Slurry and Agricultural Fuel Oil) (England) Regulations 2010 in
England, and the Water Resources (Control of Agricultural Pollution) (Wales)
Regulations 2021 in Wales. Planning for the management of run-off from
roads is split, with National Highways responsible for the ‘strategic road
network’, also known as ‘trunk roads’, and local roads managed by local
authorities. In addition to their responsibilities for roads in their areas, local
authorities are responsible for flooding and elements of drainage policy,
including the adoption of sustainable drainage solutions.93
55. It is generally recognised that achieving outcomes and managing
systems requires a ‘systems planning’ approach. ‘Systems planning’ has
been used in a number of other sectors, within the UK and beyond.
Box 5 – Systems planning case studies: National Energy Systems Operator
(NESO), Regional Flood and Coastal Committees (RFCCs), and Comités de
Bassin
NESO was established in 2024 to support the UK’s transition to net zero and
sustain a reliable and secure energy system. NESO’s responsibilities combine
long-term planning with real-time operation of the energy market. From 2025,
NESO will be responsible for producing Regional Energy Strategic Plans (RESPs).
RESPs will be informed by the current regional context, modelling of future supply
and demand against current network capacity, and an assessment of investment
need. NESO will deliver the RESP through a hub-and-spoke model, with 11
regional offices conducting place-based engagement. NESO will provide a

for Water; 25 Year Environment Plan; Environmental Improvement Plan; Local Flood Risk
Management Plans; National Flood Risk Assessment; Nature Recovery Action Plan (NRAP) (Wales);
Natural Resources Wales’ Net Zero Plan; Net Zero 2030 Routemap (Water UK); W ater Resources
Strategy for Wales; Water Strategy for Wales; Local Well-being Plans (forthcoming Wales - not
included in total)
92 Water companies’ Business Plans are broken down into ‘enhancement’ (generally new or upgraded
assets), and ‘base’. Ofwat defines base expenditure as the routine and ongoing costs required to
maintain current service levels and asset performance, excluding any enhancements or upgrades.
93 Cornwall Council, ‘Flood Risk Management Responsibilities’, 2024

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technical coordination function to ensure coherent planning within and between
RESPs.94
RFCCs, established by the Environment Agency in England, take a systems
approach to preventing and managing flooding. They consist of an
independent chair appointed by the Minister, members appointed by Lead Local
Flood Authorities (LLFAs), and independent members appointed by the EA. They
bring together community members, farmers, water companies, and landowners,
developing strategic flood partnerships which aim to manage all sources of flood
risk in an integrated way. A notable element of the RFCCs’ funding is a local levy
raised on their behalf by the EA from LLFAs via council taxes. However, the
RFCCs’ influence in the floods management system largely comes from their role
in approving the EAs investment programme for their region via the annual
allocation cycle.95 Since April 2021, RFCCs have delivered over 400 projects at a
cost of £3.4 billion, of which £0.5 billion was partnership funding, to better protect
115,000 homes and businesses from flooding.96
In France, the Comités de Bassin (river basin committees) are responsible
for water quality, sustainability, and flood protection. They are responsible for
setting an overarching plan for water management in their hydrological region.
They meet at least twice per year to set river basin plans and ensure that
catchment-level plans align with them. 40% of the committee is made up of local
authority representatives and 20% state representatives. The other 40% is
comprised of users, including farmers and environmental non-governmental
organisations (eNGOs). The committees are funded through a user charge. Each
river basin committee also has a scientific committee which provides it with advice
and offers interpretation of monitoring data.

Timelines and assumptions in water planning
56. The planning processes have developed over time. As a result, each
plan has different timelines and underpinning assumptions. RMBPs run to a
6-yearly cycle. The Water Industry National Environment Progamme
(WINEP) (England) and National Environment Programme (NEP) (Wales)
operate on a 5-year cycle aligned with the price review. Natural Resources
Wales’s (NRW) Core Management Plans for Special Areas of Conservation
(SAC) rivers are updated on an ad hoc basis, to feed into the NEP. WRMPs
and the more recent Drainage and Wastewater Management Plans
(DWMPs) in both England and Wales have 25-year time horizons, split into

94 Ofgem, ‘Decision on the Regional Energy Strategic Plan Policy Framework ’, 2025
95 Environment Agency submission to the Commission, 2025
96 Commission engagement with the Environment Agency. Figures provided January 2025.

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5-year installments to align with the Price Review period. Pollution Incident
Reduction Plans have an annual cycle.
How planning frameworks currently operate
57. The level of engagement between regulators, stakeholders and the
water industry during planning is complex and resource intensive. The
water industry estimates it submitted over 53,000 pages of data and
narrative in business plans to Ofwat in the last Price Review.97 The
Environment Agency (EA) and NRW are responsible for assessing and
agreeing if individual water company proposals will meet environmental
requirements, the EA working collaboratively with Natural England (NE)
where relevant. Before projects can be included in business plans,
companies must gain the agreement of the environmental regulator that both
environmental and underlying technical requirements will be met by the
relevant permitting deadlines.
Assumptions and economic appraisal in water planning
58. Water companies create plans to meet future water needs using
varying scenarios and assumptions. They also develop their own
forecasts for population growth and climate change to inform their WRMPs,
sometimes with help from regional groups. These assumptions are often
made separately by each company, meaning plans are often inconsistent.
59. A cost-benefit assessment is undertaken by the EA to inform its water
body objective setting through RBMPs. This appraisal assesses a set of
measures at catchment level to determine whether an objective of Good
Ecological Status (GES) is both cost-beneficial and technically feasible to
achieve. This process is repeated for each of the 335 catchment appraisals
in England and Wales, where new information is available to set overall
water body objectives at the start of each 6-year RBMP cycle.98 Objectives
are also set for ground water bodies, for instance to meet ‘Good’ chemical
status (see Chapter 3).
60. The quality of economic appraisal of schemes and projects varies
across different elements of water industry business plans. With
respect to the WINEP and NEP, prior to Price Review 2024, projects to carry
forward through business planning were selected using a ‘least cost’
approach. This is where companies identify the option that meets water
company obligations for the least amount of investment. Price Review 2024
introduced a move to ‘best value’. This approach encourages companies to
choose options that deliver the greatest overall value to society, considering

97 Water UK response to the Call for Evidence, 2025
98 Environment Agency, ‘Investment requirements for England’s river basin management plans’, 2022

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public and environmental benefits. WRMPs and DWMPs are also based on
a ‘best value’ framework, though elements of business planning which lie
outside of these plans are not subject to any economic appraisal until
submitted in business plans to Ofwat. Ofwat then scrutinises these proposals
on the basis of cost efficiency to set allowances for water company
expenditure.
Consultation and engagement in planning
61. The different plans in England each have their own consultation
mechanisms, which differ widely. For example, WRMPs are consulted on
in full, after projects are developed, with customers and wider stakeholders.
This follows informal consultation on regional water resource plans (to which
WRMPs are linked), and pre-consultation with company boards, regulators,
customers and interested parties, on strategic options and policies. For
WINEP, on the other hand, consultation is only carried out on some elements
and is done when the need for intervention is identified, for example, the
government phosphorus removal targets. There is then no external
consultation on project selection of any part of WINEP.
62. In Wales, the Well-being of Future Generations (Wales) Act 2015
directly informs the way public bodies approach water policy and the
water sector. For example, public bodies have an emphasis on partnership
(involvement and engagement), on integration (looking at water and land
holistically) and on prevention (by tackling root causes). A key mechanism
supporting this is the Price Review 2024 Forum, which includes Welsh
Ministers, NRW, the Consumer Council for Water (CCW), and other
stakeholders. The Forum aims to enable a collaborative approach to setting
strategic steers that will guide and inform water companies’ Long-Term
Delivery Strategies (LTDSs) and business plans.
Issues
63. The Commission has identified 7 main issues in relation to current
systems planning frameworks:
• The so-called ‘missing middle’ of regional governance in planning
• Limitations in driving cross-sectoral action
• Complexity of water industry planning processes
• Lack of local engagement and poor consultation practices
• Inconsistency in planning metrics and economic appraisal
• Issues with the 5-year Price Review cycle
• Uneven delivery profiles within asset management periods.

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‘Missing middle’
64. While some water environment planning occurs at the regional level in
the current water system, the Commission has heard that it is largely
failing to drive necessary action. The Rivers Trust’s ‘State of the Rivers’
report contends that the current system of environmental management is
inefficient, with a lack of focus on the regional scale which limits coordination
between national and local activities. Several eNGOs and water companies
have called for improved planning at a regional level.99 This common
governance gap has been referred to as the ‘missing middle’.100
65. Where regional planning frameworks exist, the Commission has heard
that they are achieving mixed success. RBMPs do not appear to be
sufficiently driving action in other sectors beyond the water industry that rely
and impact upon the water system, particularly agriculture.101 Responses to
the Call for Evidence highlighted that key players, such as local authorities,
are not sufficiently engaged in the determination of water system priorities at
the regional or catchment level.102 This lack of alignment has meant that the
full set of pressures in an area may not be considered when developing
plans, which could lead to missed opportunities to use land and resources
more effectively. The Office for Environmental Protection (OEP) has blamed
the failure of RBMPs to deliver outcomes on a range of issues, including the
absence of clear governance arrangements across sectors to implement and
enforce them.103
66. While regional water resources groups have received some positive
feedback, the Commission has heard that they lack a holistic approach.
The introduction of the regional water resources groups, which published
their first plans in 2022, is intended to ensure that, for the first time since the
water industry was privatised, the WRMPs of all water companies operating
in England and on the border with Wales are aligned within 5 regional plans.
The 5 plans have been brought together to present a joined-up national
picture of the challenge facing the country’s water supplies and how it should
be addressed.104 However, each of these water resource groups has a
different governance structure, and they have no standardised planning
methodology, statutory underpinning, or security of funding. Their work also
only covers water resources. There is no equivalent regional structure for
drainage and wastewater, meaning that there is no holistic plan for

99 Anglian Water, South East Water, and Water UK responses to the Call for Evidence, 2025; Angling
Trust Submission to the Independent Water Commission, 2025
100 The Rivers Trust, ‘State of Our Rivers Report’, 2024
101 Thames Water response to the Call for Evidence, 2025
102 Commission engagement with Local Authority Representatives, 2025
103 Office for Environmental Protection, ‘A review of implementation of the Water Framework Directive
Regulations and River Basin Management Planning in England’, 2024
104 Environment Agency, ‘The National Framework for Water Resources 2025’, 2025

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catchments or river basins.105 This may lead to lost opportunities to target
action where there are co-benefits, such as dealing with over-abstraction to
support both supply resilience and environmental health.106
67. Greater Manchester Combined Authority (GMCA) provides an example
of how more regional water planning can be achieved through
voluntary cross-sector engagement. In this case, an integrated water
management plan has been produced through a partnership between the
EA, GMCA, and United Utilities, supported by funding from different sectors,
such as transport, regeneration, and private sources. However, the
partnership is voluntary and there are no formal structures supporting such a
framework in Manchester or elsewhere.107
Limitations in driving cross-sectoral action
68. The Commission has heard that there is overreliance on the water
industry to deliver environmental improvements. The water industry is
comprised of large companies with guaranteed revenue streams which can
be directed towards improving water outcomes through the price control
process. Other sectors that impact the water system are more diverse and
do not have equivalent funding mechanisms available for addressing water
quality issues. For example, projects in the agricultural sector, such as
Environmental Land Management or the Slurry Infrastructure Grant, are
voluntary and only provide payments for specific environmental actions.
Similarly, there is a lack of funded plans for remediation of impacts on the
water environment from road run-off.108
69. The Commission has also heard that there is a lack of engagement and
alignment between water system planning and other forms of spatial
planning. While water companies develop their own forecasts for population
growth, the Commission has heard that there is limited input into water
system planning at the local authority level. The Commission has heard that
Local Plans are not updated regularly, that water companies are not always
closely involved in their development, and that non-household growth is
generally underestimated in Local Plans (see Chapter 7).
70. A lack of integrated planning across the water system means that local
communities are often dealing with the impacts of decisions they have
not had an opportunity to influence. For example, in north Sussex, over-
abstraction has led to a requirement from NE for ‘water neutrality,’ in which

105 Affinity Water response to the Call for Evidence, 2025
106 Regulator engagement with the Commission, 2025
107 See Box 3 in the Commission’s interim report; Greater Manchester Combined Authority,
‘Integrated Water Management Plan’, (viewed 14 July 2025)
108 Water UK response to the Call for Evidence, 2025

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new development cannot increase groundwater abstraction.109 This has
meant that local authorities have struggled to deliver critical new local
infrastructure, such as schools and fire stations, which would require
additional water.110 Local authorities attribute these water resource issues to
under-delivery by Southern Water and expressed frustration that it limits their
ability to deliver on their statutory duties.111
Complexity of water industry planning processes
71. Water companies, eNGOs, and consumer groups have all commented
to the Commission that they find current water industry planning
processes over-complex, opaque, unmanageable and, in places,
overwhelming to engage with.112 47% of respondents to the relevant
question in the Commission’s Call for Evidence feel that change is needed to
the planning frameworks for the water industry. Some of the key themes in
these responses were that regulators were not adequately supporting
effective planning (55% of respondents) and that regulatory requirements did
not support sufficient long-term certainty or respond well to emerging issues
(46% of respondents).113
72. The Commission has received evidence that the link between the
planning processes and permitting leads to unclear lines of
accountability.114 Although water companies are formally responsible for
the content of water resource and wastewater plans, the EA plays a
significant role in shaping these plans. This influence is exercised through
detailed engagement, and through the iterative permitting process.
73. We have heard that current water industry planning is not
comprehensive. WINEP and NEP, at their core, are processes for tracking
the water company interventions, identified in RBMPs, that are required for
existing and new asset permits issued under the Environmental Permitting
Regulations. As a result, they are used by the water companies to develop
parts of their business plans. However, as the primary purpose is to inform
permitting, the WINEP and NEP do not address the full breadth of needs or
programmes of measures outlined in long-term plans, such as WRMPs and
DWMPs. The Commission has heard that WRMPs, meanwhile, do not
sufficiently drive solutions, as there is no legal requirement on water

109 West Sussex County Council, ‘Water Neutrality’, 2025
110 Local Planning Authorities in north Sussex submission to the Commission, 2025
111 Commission engagement with Local Planning Authorities in north Sussex, 2025
112 Water UK response to the Call for Evidence, 2025
113 Commission’s analysis of responses to the Call for Evidence, 2025
114 Water Industry and Environment Agency engagement with the Commission, 2025

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companies to deliver these plans, while DWMPs and LTDSs have not been
sufficiently linked to business plans to achieve their aims.115
74. In their response to the Call for Evidence, the Drinking Water
Inspectorate (DWI) specifically called for a role in the long-term
planning frameworks which have an impact on drinking water quality
and distribution. While addressed in drinking water safety planning and
DWI guidance on long term planning, drinking water quality and water
distribution are not sufficiently recognised in the current strategic plans.116
We have also heard that emerging environmental and public health risks,
such as microplastics, antimicrobial resistance and so-called ‘forever
chemicals’, need greater attention in planning frameworks.117
75. The Commission has also heard that clearer delineation between base
and enhancement spend is needed to inform the scope of long-term
strategic plans. Ofwat agree further clarity in base and enhancement
definitions would reduce workload during assessment of business plans.118
The Commission has received detailed submissions from some companies
arguing that upgrades required due to increases in population, currently
funded through base expenditure, require significant engineering works and
increases to service provision, meaning they may better fit within current
definitions of enhancement.119
Lack of local engagement and poor consultation practices
76. The Commission has heard that the catchment-based approach has
been successful in driving local, cross-sector action on water. For
example, the Crane Valley Partnership, working across 5 west London
boroughs, Heathrow airport, the EA and a range of community groups led to
£20 million of third-party investment, in addition to the £3 million of funding
provided by Thames Water.120 The work of the partnership has resulted in
improvements towards GES in the catchment area, with a focus on securing
wider environmental and social benefits for local communities, including a
proposed 35km riverside Crane Valley Trail to connect green spaces along
the river.121
77. However, catchment partnerships currently only receive up to £15,000
per year in funding to support their operation. This rate has been

115 The Commission understands the current ambition to place DWMPs on statutory footing is
intended to address this for Price Review 2029; Environment Agency engagement with the
Commission, 2025; Water UK response to the Call for Evidence, 2025
116 Drinking Water Inspectorate engagement with the Commission, 2025
117 Environmental regulators engagement with the Commission, 2025
118 Ofwat engagement with the Commission, 2025
119 Water Industry engagement with the Commission, 2025
120 Crane Valley Partnership, ‘State of the Environment - River Crane Smarter Water’, 2022
121 Crane Vally Partnership, ‘Crane Valley Trail’ (viewed 16 July 2025)

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unchanged in nominal terms since 2015-16.122 This investment has been
used to generate significant additional funding at a local level. During 2023-
24, CaBA reports private funding ratios for partnerships resulting in around
£3 of additional funding for every £1 directly invested in hosting and running
the partnerships. This does not include wider government funding of the
partnerships.123 These non-government sources included water companies,
businesses, lottery funds, non-government organisations, and community
groups. In 2023-24 this funding totalled around £28 million. Government
funding, which included Defra, EA and NE and local authority funding,
remains the highest source of funding for the partnerships, totalling £38.5
million in 2023-24.124 Some stakeholders have identified strengthening
catchment-based governance as a key requirement to more effectively
deliver priority outcomes in the water sector.125
78. The Commission has heard that consultation and engagement
activities are fragmented across multiple organisations, including
government, regulators and water companies. This has led to duplication,
inefficiencies, and stakeholder fatigue.126 We have heard from consumer
groups that consultations do not provide opportunity to meaningfully
influence decisions. Communication appears to be inconsistent, with the
Commission hearing that stakeholders rarely receive feedback on how their
input has shaped decisions, which undermines transparency and trust. 127
Furthermore, the Commission has heard that early consultation, while well-
intentioned, is frequently too abstract to be meaningful. 128 Trade-offs
between competing objectives, such as affordability, environmental
outcomes and resilience, are not possible to understand at the time
consultations are carried out. The complexity of the planning system, and/or
the subject matter of the consultation also means that it can be difficult for
non-experts to be ‘intelligent customers’. The Commission has also heard
that these consultations, such as for WRMPs, are often not tailored to local
needs.129

122 For Catchment Partnerships outside of London. In nominal terms. Environment Agency,
Catchment Based Approach, The Rivers Trust, ‘Water Resources Communication and Engagement
Fund’, 2019; UK Parliament, ‘Catchment Partnerships: Funding’, 2024
123 Comparison of CaBA funding which includes Environment Agency Water Environment Funds and
additional host funding, the majority of which is funded by water companies. This ratio does not
include other Government funding such as Environment Agency, Natural England or Defra funds.
From: Catchment Based Approach, ‘CaBA Monitoring & Evaluation’, 2025
124Catchment Based Approach, ‘CaBA Monitoring & Evaluation’, 2025
125 Water UK response to the Commission’s interim report, 2025
126 eNGO engagement with the Commission, 2025
127 Consumer NGO engagement with the Commission, 2025
128 Regulator and industry expert engagement with the Commission, 2025
129 eNGO engagement with the Commission, 2025

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Lack of common planning metrics
79. The Commission understands that planning assumptions are
inconsistent across frameworks and could benefit from
standardisation. This includes those related to climate change, population
growth, water demand, leakage and storm overflows.130 We have heard from
regulators that consistency in scenarios, assumptions, and metrics across
planning frameworks is essential, and evidence sharing across sectors and
between companies should be improved.131 Water companies suggest Defra
should do more to collate and disseminate data, for instance catchment-
based data at a regional level.132 On environmental data, the Catchment
Systems Thinking Cooperative suggested integrating diverse data sources to
a unified approach to help close current spatial and temporal gaps in water
quality data – this is addressed further in Chapter 3.133
Inconsistent approach to economic appraisal
80. Regulators and planning bodies appear to have a poor understanding
of the overall value for money of interventions and trade-offs. The
Commission has heard that there is no consistent mechanism for assessing
costs and benefits across different areas of water planning.134 The EA and
NRW work with companies to identify actions needed to meet statutory
requirements, however they do not consider the overall value for money of
projects.135 Ofwat scrutinises costs once the strategic planning process has
already identified necessary actions, focusing on achieving efficient costs of
delivery.136 This means that estimates of costs and benefits are not
considered in parallel by the regulators. In Price Review 2024, full economic
appraisal of multiple options was rarely carried out before any decision on
inclusion in WINEP. Further detail of how this process works for England is
set out in Box 6.
Box 6 – Economic appraisal in RBMP, WINEP and business planning for
Price Review 2024 (England Only)137
Phase 1: catchment-level economic appraisals in River Basin Management
Plans

130 Water industry and regulators responses to the Call for Evidence, 2025
131 Environment Agency response to the Call for Evidence, 2025
132 Water industry responses to the Call for Evidence, 2025
133 Catchment Systems Thinking Cooperative response to the Call for Evidence, 2025
134 Frontier Economics, ‘Reforming Water Sector Strategic Planning’, 2025
135 Commission engagement with Environment Agency and Cyfoeth Naturiol Cymru Natural
Resources Wales, 2025
136 Commission engagement with Ofwat, 2025
137 Regulator engagement with the Commission, 2025

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The first phase involves economic appraisals at the operational catchment
scale. These appraisals identify cost-effective and technically feasible
measures to achieve GES in water bodies. Measures from multiple sectors,
including agriculture, are considered. The costs of these measures are compared
with monetised benefits, using the National Water Environment Benefits Survey.
This process determines whether setting an objective of ‘Good’ status is justified
for each catchment. The outcomes inform the proportion of water bodies where
achieving ‘Good’ status is both cost-beneficial and feasible, and contribute to the
high-level programme of measures in each RBMP, coordinated by the
Environment Agency.
Phase 2: best value approach in water company planning
In the second phase, water companies use RBMP objectives to inform their
WINEP option development. At Price Review 2024, companies were expected
to apply a ‘best value’ approach. This means proposing options that deliver the
greatest overall benefit to customers, the environment, and society—not just the
lowest cost. While the EA reviews these plans to ensure they meet
environmental and policy expectations, it generally does not assess the financial
costs of the proposed measures. Where some companies did carry out economic
appraisal on options, then the non-cost-beneficial options were sometimes not
presented to the EA at all. Where alternatives and their economic appraisals were
presented, the EA did not perform full assurance on this appraisal.
Phase 3: Ofwat’s cost efficiency assessment in Price Review 2024
The third phase is led by Ofwat through the Price Review 2024 process,
where water company business plans are assessed for cost efficiency.
Ofwat uses benchmarking and econometric models to evaluate whether
proposed costs are justified and efficient. Routine operational costs and
enhancement investments are assessed separately, and companies may submit
cost adjustment claims for unique circumstances. Ofwat does not assess the
benefits of environmental or social outcomes—its focus is solely on cost
efficiency.
As a result, no single regulator currently evaluates both the costs and benefits of
environmental projects, especially at the project selection stage, in an integrated
way.

81. The Commission has heard that there is insufficient consideration
given to alternative projects in developing water company business
plans. Of the 2,700 WINEP improvement actions in Price Review 2024
where there was some flexibility in meeting requirements, water companies
put forward multiple options for only 22% of these actions and mostly

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followed a ‘least cost’ approach.138 Least cost options tend to be grey
solutions, which give greater certainty on primary outcomes, but often with a
higher carbon cost and fewer wider benefits for biodiversity or local
communities.139 This means that companies and regulators are prioritising
single-outcome, single sector solutions over those with multiple benefits by
multiple sectors that may be better value-for-money.140
Issues with the 5-year price review cycle
82. The Commission has found that the current 5-year price review cycle in
the water industry creates significant challenges for long-term planning
and investment. This short-term focus, reinforced by rigid funding
mechanisms and delivery deadlines, discourages investment in large-scale,
long-term projects due to uncertainty around returns and high upfront
costs.141 While some progress has been made to provide more certainty for
major projects, these efforts remain limited and inconsistent. The planning
cycle often prioritises short-term compliance over longer term asset lifecycle
needs, leading to inefficient capital use over time, prioritising short term
solutions when more expensive but longer lasting solutions may be better
value in the long term.142 Regulatory frameworks such as WINEP, DWMPs,
and WRMPs look at different time horizons, further complicating long-term
planning. Stakeholders argue that Ofwat’s emphasis on keeping customer
bills low has amplified this short-termism, undermining resilience and
strategic investment (see Chapter 5 for further discussion).143 The current
system therefore lacks the flexibility and integration needed to support
sustainable, long-term infrastructure development in the water sector.
83. The Commission has also heard that the current planning system is too
rigid to deal with emerging funding requirements, within AMPs.144 For
example, the DWI highlighted that rigid planning structures reduce the ability
to respond effectively to emerging risks and emphasised the need for more
flexible funding and investment to support action outside of fixed AMP
cycles.145 While the Security and Emergency Measures (Water and
Sewerage Undertakers and Water Supply Licencees) Direction 2022 (as
amended) (SEMD) provides a robust legal framework for managing known

138 Environment Agency engagement with the Commission, 2025
139 Environment Agency engagement with the Commission, 2025
140 Wessex Water and Frontier Economics, ‘Outcome based environmental regulation’, 2021
141 Investor and water industry engagement with the Commission, 2025
142 Water Industry engagement with the Commission, 2025
143 Water Industry engagement with the Commission, 2025
144 Water company engagement with the Commission, 2025
145 Drinking Water Inspectorate response to the Call for Evidence, 2025; A National Engineering
Policy Centre submission to the Commission further stated that the 5-year funding cycle undermines
the incentive to invest for resilience, give clarity to supply chains, and address complex challenges.

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risks, its structured, milestone-based approach can be less agile when
responding to rapidly evolving threats.146
84. While there have been recent attempts to increase flexibility to take
account of longer term projects in the price review cycle, currently the
mechanisms are limited in scope and number.147 Ofwat have made
attempts to address the need for agile funding across AMPs by introducing
novel models such as Direct Procurement for Customers (DPC), the
Regulators Alliance for Progressing Infrastructure Development (RAPID), the
Accelerated Infrastructure Delivery schemes and multi-AMP delivery
projects.148 However, while well regarded,149 these various options for
flexibility in Price Review 2024 make up only 13% (£5.7 billion) of
enhancement expenditure.150 Ofwat have also introduced uncertainty
mechanisms to manage significant market shocks or changes in
circumstances. For example, Ofwat included an uncertainty mechanism in
Price Review 2024 to apply to any significant increase in costs due to any
new requirements on cyber security or changes in level of threat.
Box 7 – Case Study: Insights from Price Review 2019 Final Determination on
Supporting Long-Term Planning and Resilience Through Flexible Regulation.
The Havant Thicket Reservoir is a major new water resource being
developed by Portsmouth Water. The project was supported by Ofwat through a
dedicated 10-year price control, introduced during the Price Review 2019 cycle.
This longer regulatory period allowed for £124 million to be allocated over a
timescale better suited to the planning and delivery of major infrastructure, outside
of the standard 5-year cycle.151 This structure has allowed for investment to be
delivered more effectively over time, which is helping to manage personnel and
resources, as well as peaks and troughs in delivery. Ofwat developed this
approach alongside other new mechanisms, such as gated funding and direct
procurement, as part of a broader strategy to improve regulatory flexibility.
Committing to the funding envelope has enabled the reservoir project to proceed
smoothly, and is planned for delivery by 2031.152 Once it is operational it will

146 Drinking Water Inspectorate response to the Call for Evidence, 2025
147 Water Industry engagement with the Commission, 2025
148 Ofwat, ‘Price Review 2024 final determinations: Expenditure allowances’, 2025
149 Industry engagement with the Commission Secretariat, 2025
150 Ofwat analysis of multi-AMP scheme spend in AMP8 and the associated spend for future AMPs,
including: accelerated and transition spend, supply interconnectors, supply, Southern Water multi -
AMP, United Utilities A-WINEP, Severn Trent advanced SO, phosphorus & sanitary determinants,
growth at sewage treatment works, Direct Procurement for Customers, in-house, and Specified
Infrastructure Projects Regulations. This totals £5.7 billion, which is c.13% of c.£44 billion of
enhancement cost allowance. Prices are in 2022/23 base year.
151 Ofwat, ‘Overview: Price Review 2019 final determinations’, 2025; Portsmouth Water, ‘Reservoir
construction timeline’ (viewed 14 July 2025)
152 Ofwat, ‘Guidance on Havant Thicket’ (viewed 18July 2025)

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relieve pressure on abstraction from the Rivers Test and Itchen, two of England’s
most precious chalk streams.
Uneven delivery profile within AMPs
85. The Commission’s interim report identified that a ‘feast and famine’
pattern in environmental investment is a systematic flaw in the current
approach to strategic direction by government and regulators.
Spending is heavily concentrated in the later years of the AMP (detailed in
Figure 4) with key investment programmes, such as under the WFD
Regulations, in large part deferred over successive price controls.153
86. The Commission has heard that deadlines for delivery are typically set
for the end of the 5-year period (AMP), unless there is a legal deadline
requiring delivery before the end of that AMP. For example, 93% of storm
overflow improvements154 and phosphorus removal155 projects in Price
Review 2024 have delivery dates set at the end of the AMP. Even with time
incentives to deliver earlier, Ofwat predict little delivery in the first 2 years of
AMP8 (2025-2030), as seen in Table 1. We have heard that this time is used
for specific design of interventions. Where design is either not necessary or
is more straightforward, delivery profiles can be flatter. This reflects the lower
amount of engineering work required in programmes such as metering or
mains renewal.
Table 1 - predicted spend profile of selected programmes in Price Review 2024
2025-26 2026-27 2027-28 2028-29 2029-30
Total AMP8
Allowances
Storm overflows 0% 5% 35% 60% 100% £10.2 billion
P-removal 0% 0% 25% 60% 100% £4.8 billion
Water supply 18% 24% 46% 47% 100% £1.3 billion
Interconnectors 0% 0% 40% 40% 100% £1.3 billion
Metering 14% 33% 54% 77% 100% £2.9 billion
Mains renewals 15% 35% 60% 80% 100% £2.7 billion

153 Independent Water Commission Interim Report, 2025
154 Defra, ‘PRICE REVIEW2024Price Review2024 Water Industry National Environment Programme ’,
2025 – Storm overflows improvement projects are assumed to be all projects with primary driver
codes: BW_IMP1, BW_IMP2, BW_IMP3, BW_IMP4, EnvAct_IMP2, EnvAct_IMP3, EnvAct_IMP4,
EnvAct_IMP5, SW_IMP, SW_ND, BW_ND
155 Defra, ‘PRICE REVIEW2024Price Review2024 Water Industry National Environment Programme ’,
2025 – Phosphorus removal projects are assumed to be all projects with primary driver codes:
EnvAct_IMP1, HD_IMP, HD_ND, HD_IMP_NN, SSSI_IMP, SSSI_ND, U_IMP2, WFD_IMP_MOD,
WFD_IMP_WRHMWB, WFD_IMPg, WFD_IMPp, WFD_IMPm, WFD_ND, WFD_ND_WRHMWB. Not
all WFD or HD actions are phosphorus removal. These may include projects to manage other sanitary
determinands, such as ammonia removal and biochemical oxygen demand (BOD) projects.

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Source: Ofwat156
87. We have heard that the absence of medium-term certainty in planning
means that companies are unable and unwilling to invest fully in
project design until funding is guaranteed.157 As design can often take 12
to 24 months, this means that the early years of each 5-year cycle contain
comparatively little actual delivery. As Figure 4 demonstrates, this creates
peaks and troughs in delivery within the 5-year cycle, which companies and
their supply chains have told us that they can struggle to meet. It also
creates inefficiencies as personnel are stood up and down every 2 to 3
years, creating reliance on consultancies for design and project support,
whereas it may be more efficient to bring some of these services in-house.158
It also causes significant pressures on other connected processes, such as
town planning, as the peaks require companies to make many planning
applications at similar points in the cycle rather than in a more steady flow.159
Figure 4 - Water company spend by year in England and Wales, between 1989-
90 and 2024-25, in 2022-23 prices, £ billion

SourceOfwat160

156 Ofwat data provided directly to the Commission, 2025
157 Water industry engagement with the Commission, 2025
158 Water industry engagement with the Commission, 2025; Commission secretariat engagement with
devolved administrations, 2025
159 Water industry engagement with the Commission, 2025
160 Ofwat data provided directly to the Commission, 2025
0
1
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Water company spend, £ billion
Year
Base Enhancement AMP begins/ends

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Conclusions and recommendations
88. To improve planning, there are 4 key areas where reform is needed:
• the introduction of a systems planning framework in England and
Wales
• increased flexibility in the 5-year Price Review cycle
• streamlining of water industry business planning
• an improved approach to setting assumptions and delivering economic
appraisal.
Systems planning
Better planning is needed to deliver what people want where they live
89. The current water system planning frameworks have developed
piecemeal, without rationalisation, and are failing to deliver much of
what society and the economy demands and expects. Decision-making
across the water system is fragmented, with bodies planning for different
needs based on different timescales and geographies. Key stakeholders,
such as local authorities, are not sufficiently involved in decisions which can
constrain their ability to deliver key priorities. The misalignment between
sectors, timelines, and geographical scales limits opportunities for cross-
sector working. The complexity of water industry business planning
frameworks, meanwhile, is undermining investor confidence and making it
harder for regulators to hold water companies to account for delivery.
90. Water must be managed as a system in order to meet the growing
challenges across sectors which impact and rely on water. For water
systems, effective systems planning involves the coordinated development
and management of water by bringing together hydrological, socio-
economic, administrative, and legislative interests. An example is tackling
pollution from storm overflows. This cannot be done effectively or efficiently
without also considering ‘pre-pipe’ issues such as rainwater, drainage, and
consumer behaviour.161
91. A systems planning approach would address the ‘missing middle’ in
the current system and give greater decision-making responsibility
over water investment planning to people, organisations and
authorities with a stake in their local water systems. Such an approach
would consider the needs of current and future generations in planning for
the delivery of water system outcomes, including water quality and supply.
While some water system planning functions already exist, including regional

161 CIWEM Response to the Call for Evidence, 2025

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planning for water resources and some environmental outcomes, they are
dispersed across different organisations, operating at different spatial scales,
and often lacking clear accountability.
Recommendation 3: A comprehensive systems planning framework should be
introduced for England and Wales, with responsibility for integrated and
holistic water system planning. In England, the systems planners should be
regional – or ‘regional water authorities’. In Wales, the systems planner should
be a national authority.
92. This recommendation outlines the systems planners’:
• functions
• geographic scale
• responsibilities for convening and consultation
• levers to drive action by other sectors
• national coordination arrangements
• composition – for instance, their chairs, strategic boards
• organisational independence
93. The step-by-step process for developing regional systems plans is outlined
at the end of this chapter.
Functions
94. Systems planners should be responsible for planning, funding, setting
water body objectives, and monitoring delivery of plans. They should
also act as a convener across the water system.
Planning
95. The primary function of the systems planner, in England and Wales,
should be to produce strategic, cross-sectoral spatial plans, based on
regional and national objectives, to ensure that the water system
delivers outcomes that benefit society, both now and in the future. They
should consider the spatial development priorities for their area and account
for other relevant regionally or nationally specific characteristics, including
economic, climate, or land-use factors. These plans should be implemented
in place of current RMBPs.
96. Plans should sit under and deliver against requirements set by the UK
and Welsh Governments through their respective National Water
Strategies and Ministerial Statements of Water Industry Priorities. As
described in Chapter 1, a new approach to government strategic direction
would be cross-sectoral, incorporating requirements for all organisations

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impacting on or interacting with the water system. Governments would
provide guidance to the systems planner on managing trade-offs, and
principles that a systems planner should have regard to, such as appropriate
phasing of improvements over time or the use of nature-based and
catchment-based solutions.
97. In line with the scope of the National Water Strategy, systems plans
should cover both the water environment and water supply. As
described in greater detail below, regional system planners in England
should consider regional priorities, assess current conditions, and put
forward a set of regional objectives. The national systems planner for Wales
should consider national and regional priorities, assess current conditions,
and put forward a set of national and regional objectives. This would replace
the current roles of the EA and NRW in creating RBMPs. As described in
Chapter 3, the Commission believes a broader review of the WFD
Regulations is needed. However, the Commission considers that replacing
the requirement in the WFD Regulations to produce RBMPs with a systems
planning framework could begin sooner. System planners should ensure that
water supply is sufficient to meet the current and future needs of the region
(and nation in Wales) and is robust to future water system stress. System
planners would take on the water resource planning that is currently
conducted by regional water resource groups in England.
98. Plans should consider the region or nation’s spatial development
priorities, particularly those which are likely to have a significant
impact on the water system, such as housing development or Net Zero.
They should take account of broader, non-water environmental requirements
that impact on the water environment, such as Local Nature Recovery
Strategies, and other tools such as the Land Use Framework162 in England
and Future Wales: the National Plan 2040163 in Wales, which could guide
spatial targeting of water-related actions.
99. The water systems planner should also ensure that its plans are
aligned with flood planning. The Terms of Reference for the Commission
set out that it should only consider floods where they currently interact with
strategic planning for the water system.164 It has become apparent as the
Commission has progressed, that it may be sub-optimal to introduce a
systems planning function for the water system without integrating floods
planning, particularly in the case of interactions between surface-level
flooding and sewage discharges. While the Commission will not make
specific recommendations about flood policy, there are areas in which we

162 Defra, ‘Land use in England’, 2025
163 Llywodraeth Cymru Welsh Government, ‘Future Wales: the National Plan 2040’, 2025
164 Independent Water Commission, ‘Independent commission on the water sector regulatory system:
terms of reference’, 2024

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suggest further alignment would be beneficial. In Wales, the national scale
would already align with the Flood and Coastal Erosion Committee (FCEC)
but other aspects of alignment could be considered.165 For example,
government may wish to consider coordinating flood risk reduction planning
cycles and water industry Price Review cycles. In the longer term,
government may wish to consider integrating floods planning into the
systems planner. RFCC chairs have recently raised the importance of better
alignment between flooding and water planning, due to the overlaps between
these areas and the potential for improved outcomes.166
100. The plans produced by the water industry in response to the objectives
of the systems planner would form the basis of the Price Review. More
detail on how this process would work is described at the end of this chapter.
Funding
101. The systems planner should map funding sources for water available
within their region or nation, and direct funding towards regional or
national objectives. Where possible, the systems planner should have a
role in directing, blending, and distributing funding for water. Systems
planners should be consultees for funding with a significant impact on water
to ensure that it has a role in directing funding towards specific interventions.
This could include funding streams, such as the Water Restoration Fund, or
funding for water-related projects within Environmental Land Management
Schemes.
102. Water industry funding would be in line with regional or national
systems objectives. Systems planners should be given direction over water
company enhancement expenditure, and as discussed below, elements of
company base expenditure. Water industry funding is the most significant
funding stream in the water system. This would represent a significant
change, and ensure that local voices, customers and experts have stronger
authority over companies’ boards’ decisions on investment priorities. System
planners should ensure that the objectives that they set are deliverable, that
they can be financed and are affordable for billpayers.
103. In addition, the regional systems planner in England should have some
control over government funding in the water system. Any grant-in-aid
funding, from Defra or the regulators for water system outcomes planned for
a region, should seek the direction of the regional system planner to ensure
it aligns with regional objectives. This would follow the example set by
RFCCs, in which they approve the EA’s investment programme for their
region via the annual allocation cycle. Any grant-in-aid funding from the

165 Llywodraeth Cymru Welsh Government, ‘Flood and Costal Erosion Committee (Wales)’, 2023
166 Environment Agency submission to the Commission, 2025

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Welsh Government, NRW or other public bodies in Wales for water system
outcomes, should seek the direction of the system planner to ensure it aligns
with national and regional water objectives.
104. A local levy, as for RFCCs, could also be used to provide a pot of
funding over which the regional planner would have full discretion. This
could help to address issues that are the responsibility of no particular
sector. This levy could be raised through local government council taxes and
be distributed to the regional planner(s) covering the local authority’s area.
105. A system planner could also have a role in leveraging private finance
from other sectors. One of the benefits of a regional approach to water
system planning is that water system improvements are at a sufficient scale
to attract private sector funding. This is an important area in which a system
planner may be able to add significant value to help reduce reliance on water
industry funding to deliver benefits. Integrating catchment partnerships into
systems planning will also help to leverage smaller scale private funding and
prevent existing smaller scale funding partnerships being crowded out.
Setting water objectives
106. The systems planners should be responsible for setting water
objectives. Objectives are currently set through the RBMP process by
environmental regulators. They are subject to a detailed cost-benefit and
technical feasibility assessment on a 6-year cycle. These plans describe
current water body conditions, set local environmental objectives for water
bodies and protected areas, and put forward a programme of measures to
meet these objectives. Moving forward, the systems planner should be in
control of deciding, within the framework of national law and government
strategy, where interventions are needed. Systems planners would set
objectives, and who should deliver them, by carrying out apportionment of
those objectives to different sectors, in line with the National Water Strategy
and the polluter pays principle. System planners would commission delivery
bodies (such as water companies, catchment groups, local authorities and
other actors) to develop and present options to meet those objectives, from
which it would select the options which represent the best value for money,
including wider benefits, to meet those objectives.
107. Systems planners will require full access to monitoring and
assessment data on water bodies to make effective plans and
decisions. While the monitoring and assessment functions should be
retained within the environmental regulators, there would need to be clear
information sharing agreements in place. This will allow the systems planner
to provide an assessment of the condition of water bodies, and the
pressures affecting them, when setting objectives.

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Monitoring delivery of plans
108. The systems planners should maintain high level monitoring of
delivery of their plans and assess whether progress is being made. The
strategic board could meet at regular intervals to discuss progress on plan
delivery, including deciding whether corrective action is needed to meet
objectives. Where sectors are off-track, there should be clear escalation
routes to regulators. This could take the form of an ‘alert mechanism’ to
trigger action by regulators. This data would also be used to inform and
monitor progress against the National Water Strategy.
109. Plans should be subject to periodic evaluation of the effectiveness of
measures, with some assessment of how expected costs and benefits
have manifested in practice. This evaluation should be proportionate and
designed to inform future decision making. This could include building the
evidence base on specific and novel interventions, including innovative
nature-based and cross-sector solutions, and informing knowledge sharing
across catchments and regional system planners.
110. The responsibility for monitoring water industry plans should remain
with regulators. It is crucially linked to enforcement and compliance
functions. However, it is important that systems planners have sight of these
plans, along with a route for members of the strategic board of the system
planner – such as local authorities – to be able to escalate concerns to, and
receive information from, the regulator. See Chapter 7 for further discussion
of regulator assurance of water company delivery.
Interactions with regulators
111. The regulators in England and Wales would have an advisory role to
the strategic boards of systems planners in the objective-setting stage.
This would help to ensure alignment between objectives and legal
requirements. Regulators would also need to confirm that any interventions
agreed by the systems planner would be eligible for permits and licences,
where these are required. Where the regulators believe that objective
setting does not align with legal or permitting requirements, they would have
a right to object. There would be an escalation route to resolve any dispute
on this, and other issues, if needed. Applications for permits would continue
to be made to regulators, who would consider the systems plan when
making decisions on whether to grant them.
112. If an independent systems planner were established, some of the
regulators’ functions would move into the new system planning bodies.
Those teams which conduct planning, including for RBMPs and water
resources, would move into regional systems planners. These functions are

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currently divided between national and local EA and NRW teams. However,
other functions related to compliance, including permitting, monitoring, and
enforcement, would remain within the regulator. This would allow them to
ensure that proposed plans meet legal requirements and can be enforced.
Geographic scale - England
113. Existing River Basin Districts should largely form the basis of the
geographic scale of regional planning in England. River Basin Districts
are geographical areas encompassing one or more river basins, their
associated groundwater, and coastal waters (out to one nautical mile).167
The use of existing River Basin Districts, where practical, would help to
minimise disruption to current water environment planning processes and
monitoring. It is also likely to be an appropriate scale for managing water
supply, as stakeholders have reported that the current scale of regional
water resources groups is too large. The boundaries of river basin districts
would have to be altered slightly to account for cross-border differences. This
would include sections of the current Dee and Solway Tweed River Basin
Districts moving within the remit of the north west regional water systems
planner, which would require close collaboration with Welsh and Scottish
planning bodies, respectively.168
114. The Commission considered different scales of spatial planning and
recommends the regional scale as the most effective choice in
England. There is no perfect geographic scale for water system planning,
and each option comes with its own set of strengths and challenges.169 The
Commission considered using the move towards increased local devolution
as an opportunity to consolidate water system planning in strategic
authorities.170 However, environmental stakeholders have strongly
emphasised the importance of managing the water system according to
hydrological boundaries.171 Additionally, there could be more than 35
strategic authorities post-devolution, which would likely be too small to
deliver the benefits of regional planning.172 Planning in catchments, of which
there are over 100 in England, was also discounted on this basis.173 Water

167 Environment Agency, ‘River basin management plans, updated 2022: introduction’, 2022
168 This would, for example, follow a similar approach to the ‘English Severn and Wye’ RFCC, which
covers the English side of the border. Environment Agency, ‘Regional Flood and Coastal
Committees’, 2025 (viewed 17 July 2025)
169 eNGO engagement with the Commission, 2025
170 House of Commons Library, ‘English devolution: Mayoral strategic authorities’, 2025 (viewed 17
July 2025); Ministry of Housing, Communities and Local Government, ‘English Devolution White
Paper’, 2025
171 eNGO engagement with the Commission, 2025
172 Based on recommended minimum population threshold of 1.5 million, as set out in the English
Devolution White Paper
173 There are over 100 management catchments, used by the EA as a scale for planning, and 420
operational catchments, used in the economic analysis process. Environment Agency, ‘ Classifications

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company boundaries were also considered as a possible scale of planning,
but they do not align with hydrological boundaries, vary in size, and are
sometimes fragmented geographically. The Commission recognises that not
planning around water company boundaries means that some companies
will have to deal with more than one planner. The Commission also
considered whether water resources groups could be expanded to perform a
wider range of water system planning functions. However, these groups
cover areas that are too large to effectively integrate local planning, with only
five groups covering the country (although the existing water company
expertise supporting these groups, and ongoing efforts to better engage
other sectors in planning for water resources, should be retained at the new
regional scale). Planning at the river basin scale helps to balance this need
for locally specific planning with a drive towards simplicity.
Geographic scale – Wales
115. All of Wales should be treated as a single district for the purposes of
water systems planning, to allow flexibility in the Welsh context. The
national systems planner approach would take into account Wales’s
devolved status and national identity, the geographic scale and population
size of Wales, and align with the Welsh Government’s centralised
governance approach to water management. This would follow the example
set by the Flood and Coastal Erosion Committee (FCEC).174
116. Establishing a single river basin district for Wales would involve
splitting responsibility for the Severn River Basin District along the
border, with the creation of a Severn district in England and the Welsh
side moving under the remit of a Welsh systems planner. It could also
require moving the part of the current Dee River Basin District that is in
England into the north-west region. The Commission acknowledges that
there are likely to be cross-border issues associated with dividing river
basins along national borders, such as those which already exist in the Wye.
Ongoing discussion between governments will be needed to manage them,
but we would make the following observations about how issues could be
prevented and resolved. There would need to be a robust set of protocols in
place for managing cross-border water systems. This could include
developing a shared set of principles for how they should be managed, for
example: a duty to cooperate; an agreement to share monitoring data; or a
duty to consult on planned measures that could have cross-border impacts.
Where disputes do arise, existing mechanisms, such as the Inter-Ministerial
Group for Environment, Food, and Rural Affairs, could be a forum to resolve

data for England’ (viewed 11 July 2025); Environment Agency, ‘Catchment Data Explorer’ (viewed 17
July 2025)
174 Llywodraeth Cymru Welsh Government, ‘Flood and Costal Erosion Committee (Wales)’, 2023

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them. The challenges in addressing pollution in the River Wye (which runs
along the border in places and also crosses it several times) demonstrate
the difficulty of securing cross-border action on water. However, the
introduction of systems planners in both England and Wales should help to
streamline and support the joined-up spatial planning that is needed on both
sides of the border.

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Figure 5 - Proposed Regional Systems Planning Illustrative Boundaries

SourceDefra Analysis produced for Commission175

175 Illustrative boundaries using WFD River Basin Districts Cycle 2 for England with North West river
basin extended to England-Wales and England-Scotland border.

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Convening
117. Systems planners should play a wider role than just developing
regional plans. They should also provide a regular forum for discussing
water system issues. In England, this means building on the existing
catchment-based approach and making it a formal part of systems planning.
This would help ensure local voices are heard.
118. Funding should be increased to strengthen catchment- based planning
in England and Wales. In England, funding should be increased to support
a full-time catchment lead in each of the more than 100 catchment
partnerships. This role would lead catchment planning, take part in systems
planning through catchment working groups, and oversee delivery of
catchment plans. The UK government should assess the full cost of
employing full-time Catchment Leads, including any extra costs for setting up
partnerships where they do not yet exist. This investment could improve the
consistency and quality of catchment plans and strengthen their role in
systems planning. Government may also wish to link this funding to greater
accountability for delivering high-quality plans, following examples such as
France’s River Basin Committees. In Wales, where there is currently less
coverage of catchment partnerships, the government should consider how it
can best support catchment-based planning.
119. Working groups should be created which could advise the systems
planner on specific areas of water system planning. This approach
follows precedents in plans for the forthcoming RESPs, which will have
regional working groups to provide input and oversight of plan development
and formally advise the Strategic Board.176 These groups will be for the UK
and Welsh Governments and the systems planners to set out, and may vary
by region. They may be different in Wales, for example, given there are
many more local authorities in the systems planner’s area; there may also be
a need to establish a specific group dedicated to managing the impacts of
metal mines.
120. These groups would be tasked to come to the strategic board with
proposals for interventions that could be part of the Regional Plan.
Similarly, they could be commissioned by the strategic board to develop
pathways to meeting targets in their areas of expertise. These groups could
include (a) local catchment groups, with the chair of this group representing
it at the strategic board; (b) other local authority representatives in the
region, to inform views of the local authority representatives on the strategic
board; (c) water resources stakeholders, in place of the current water
resources groups under the National Framework for Water Resources; (d)

176 Ofgem, ‘Regional Energy Strategic Plan policy framework decision’, 2025

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agricultural stakeholders, who could identify how to reduce the impact of
diffuse pollution from agriculture and integrate this into the plan; (e)
sustainable drainage, drawing together local authorities, Highways England
or Welsh government transport, water companies and others; and (f) water
and nature, to ensure that plans take account of Local Nature Recovery
Strategies, the needs of protected sites and Special Areas of Conservation.
Consultation
121. The systems planner should take on the responsibility to be a single
point of contact for water planning consultations. In carrying out this
function, the system planner could coordinate consumer, eNGO and other
stakeholder input into planning processes, and ensure compliance with
regulatory requirements (for example, that any statutory consultation
deadlines are met). To improve accessibility, systems planners could create
and own an online hub for all relevant water consultations, including those
owned by the water industry. This system would be similar to the Defra
Citizen space tool - Defra - Citizen Space or Transport for London’s
engagement tool - Have Your Say Transport for London. This approach
would enable clear channels of communication and streamline interactions
with stakeholders. This would enhance the effectiveness of public and
regulatory engagement to build trust with stakeholders. Consultation
activities should clearly demonstrate how feedback has been used in the
decision-making process. This could be achieved through transparent
feedback reports hosted on the hub.
Influence over non water industry sectors
122. The levers to achieve water system objectives across all sectors
should be strengthened, with a particular focus on agriculture. While
agriculture’s impact on the water system is regulated through the Farming
Rules for Water in England and the Water Resources (Control of Agricultural
Pollution) (Wales) Regulations 2021 in Wales, low compliance rates
demonstrate that they are not achieving their intended purpose.177 Increased
enforcement activity has helped to identify and resolve non-compliance and
should be further expanded. The UK and Welsh governments should, as part
of their National Water Strategies (as described in Chapter 1), set out what
existing levers and additional mechanisms are needed to mitigate the impact
of key sectors, including agriculture on water quality. This could be supported
by a gap analysis between current diffuse pollution from agriculture and an

177 In 2023, EA inspections in England identified at least one area of noncompliance with the Farming
Rules for Water 2018 in over 50% of inspected farms (Working with farmers to protect our future land
– Creating a better place). In Wales, NRW inspected 203 farms between November 2023 and March
2024 and found 63% to be non-compliant with one or more of the regulations on the first visit (Natural
Resources Wales / Performance report 2023/24).

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assessment of what is required to reach the sector targets outlined in the
National Water Strategy.
123. Systems planners should have a role in directing Environmental Land
Management funding towards water system priorities to maximise its
impact. Voluntary action, such as through the Catchment Sensitive Farming
Scheme, has also had measurable benefits for water quality and should
continue to be supported.178
124. Systems planners should also engage with National Highways, Welsh
Government and local authorities on the actions required to address
pollution arising from road run-off. This could include identifying the
actions required to meet objectives and being consulted on any plans to
mitigate issues identified.
125. Where new national strategies and targets are likely to have a
significant impact on water resources or the water environment, the
national systems planning coordination function (see below), in
coordination with the National Infrastructure and Service
Transformation Authority (where appropriate), should be consulted on
how they could be accommodated. An example of this could be in the
development of more data centres for the projected increase in Artificial
Intelligence use, which have a high-water need.179 The regional water
systems plans, overseen by the national coordination function, would in
effect be the sectoral spatial plans set out in the 10 Year Infrastructure
Strategy.180
126. Planning for the water system should be closely aligned with other
spatial planning. Alignment would be supported by systems planners
having a formal role in the planning system, for example through being
statutory consultees on Spatial Development Strategies and Local Plans, to
align plans to enable growth. This would focus on strategic planning only
rather than specific planning applications, which could remain subject to
scrutiny by the environmental regulator, with an escalation mechanism to the
systems planner for any applications of strategic importance. The UK and
Welsh Governments should consider how to take this forward alongside
changes to the regulators and, in England, implementing the Corry Review,
particularly which body should be the ‘lead regulator’.181 The role of water
companies in planning is covered in Chapter 7.

178 Natural England, ‘Catchment Sensitive Farming Evaluation Report – Water Quality Phases 1 to 4
(2006-2018) - NE731’, 2019
179 Oxford University, The true cost of water-guzzling data centres
180 National Infrastructure & Service Transformation Authority and HM Treasury, ‘UK Infrastructure:
A 10 Year Strategy’, 2025
181 Defra, ‘An independent review of Defra’s regulatory landscape’, 2025

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Composition
127. Each systems planner should have a strategic board with an
independent chair appointed by the Secretary of State in England and
the Welsh Ministers in Wales. The appointment of an independent chair
would follow the model of RFCCs and the FCEC, in which the Secretary of
State or Welsh Ministers appoint appropriate individuals in line with the
Governance Code for Public Appointments.182 Independence will be
important to enable the chair to make challenging trade-offs between
conflicting regional priorities and bolster the board’s credibility in making
contentious decisions. The Commission considered whether the chair should
be a representative from a local authority within the region in England but
has concluded that local government representation would be best achieved
through the membership rather than leadership of the strategic board. With
River Basin Districts spanning multiple local authority boundaries, it is
important that the chair is not biased towards a particular city or area in the
region. Appointing an independent chair also offers the opportunity to bring in
leaders with expertise in water system or regional planning.
128. The Commission also recognises the importance of local devolution in
England, and of giving elected mayors the opportunities to influence,
inform and be informed by plans for the water system in pursuit of
sustainable growth. For this reason, a political leader within the region
should be appointed to a Deputy Chair role, alongside other local
government representation on the board. Choosing representatives which
reflect the entire geographic remit of the systems planner will likely be
challenging, particularly in Wales, where there will be a single systems
planner for the nation. The Local Government Associations in England and
Wales may be able to support the process of choosing appropriate
representatives or setting principles for this decision. This will allow them to
champion local priorities in the planning process, alongside a non-political
chair. The deputy chair should be nominated by the local authorities in the
region to represent them and appointed by the Secretary of State or Welsh
Ministers.
129. The rest of the strategic board should be composed of independent
experts, representatives from local authorities and a range of other
representatives who impact and rely upon the water system. The board
should be composed of between 9 and 12 people, to ensure high-quality
engagement from all participants and effective decision-making. There will
be opportunities for others to feed into the planning process without sitting

182 Cabinet Office, ‘Governance Code on Public Appointments’, 2024

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on the board, such as through working groups or by responding to
consultations.
130. Some sectors may require additional support to engage with systems
planning. For example, to ensure local authorities can effectively participate
in the regional committees, government may need to provide them with
additional funding to increase their capacity to input into the development of
regional systems plans. Under the New Burdens doctrine in England,
departments are required to allocate funding for the costs associated with
new duties from government. This is to prevent unfunded requirements from
straining local authority budgets.183 If capacity funding is provided to local
authorities to engage with systems planning, it should be ringfenced to
ensure that it is solely used for its intended purpose.
Box 8 – Composition of the systems planner strategic board
The Commission recommends that the strategic board is composed of an:
• Independent chair
• Deputy chair who represents local government interests
• Catchment partnerships representative
• Consumer representative, nominated by a consumer representative;
• Environmental expert
• Public health expert184 (these could draw from the pool of local authorities’
Directors of Public Health in England or be nominated by Public Health
Wales in Wales)
• Engineering expert
• Second local government representative (where possible chosen to ensure
balance – for example, if the deputy chair is from an urban authority, the
second representative could be from a rural authority)
• Transport representative nominated by the Department for Transport or
Welsh Government
• Agricultural representative
All appointments should be made by the Secretary of State or Welsh Ministers,
even if members are nominated by other bodies, and should be aligned with public
appointment rules185. This will support alignment with national priorities and ensure
that members have status and authority.

183 Ministry of Housing Communities & Local Government, ‘New burdens doctrine: guidance for
government departments’, 2025
184 Recommended to the Commission by the UK Government’s Chief Medical Officer, 2025
185 Cabinet Office, ‘Governance Code on Public Appointments’, 2024

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131. Each systems planner should be staffed with a secretariat. We propose
that these staff are employed by transferring the planning functions from the
existing regulators to the new systems planner, to ensure that expertise is
retained within the ecosystem. However, they would be directed by the
objectives and independent leadership of the systems planner, which we
expect would necessitate cultural change in the new organisation.
Resourcing for the system planner is estimated to require 20 to 50 Full Time
Equivalent staff (FTE) per system planner, some of whom would be
transferred from existing functions in the regulators. Staffing requirements
will depend on the interaction with regulators and will vary between system
planners depending on size of river basin district and structure.186 The Welsh
systems planner is likely to require a higher number of staff than regional
systems planners in England, given that it would operate at a national scale
spanning three existing river basin districts. There may also be a need for
additional skills to be recruited to ensure that systems planners have
sufficient cross-sector expertise. This could include expertise in local
planning and transport, or other areas in which current regulators have a
limited role.
National coordination - England
132. In England, a light national water systems planning coordinating
function would sit above the regional water system planners. The
purpose of this would be to ensure that regional plans add up to national
targets, are of the appropriate standard, and are interoperable. They would
also have a role in advising central government on national water priorities.
The national coordinator would establish a single methodology for the
regional planners to follow when developing their plans. There could be an
escalation route to the Secretary of State in the case of disputes between
national coordinators and regional water systems planners. The national
coordinator would also support on monitoring the delivery of systems plans
to ensure consistency of approach and effective use of digital tools and
information sharing. Operational decisions, such as around water transfers,
may also take place at this level. It may be appropriate to situate RAPID
within the systems planner, or to ensure it is directed by the national
coordinator if it remains separate. The Commission believes that this
national coordination function may not require a separate body but could sit
within Defra, given that the Defra Ministers and officials will be the principal
authors of the National Water Strategy and Ministerial Statement of Water
Industry Priorities (MSWIP).

186 For example, the Commission understands that there is around a 3x variation between the
smallest and largest local RBMP teams in the EA currently.

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133. Accountability mechanisms for the regional planners will depend on
the structural option chosen for their establishment (see ‘independence’
section). An independent systems planner would be accountable directly to
ministers with a duty to take advice from the regulators about environmental
compliance and value for money. In the ‘integrated’ option, the systems
planner would be regulated by the regulator in which it is housed, who would
be responsible for ensuring that the systems planner operates in accordance
with its duties and responsibilities day-to-day. In both cases there would be
an escalation or ‘comply or explain’ route in the case of a conflict between
the systems planner and the regulator. See Box 9 for further detail on the
‘comply or explain’ approach.
Box 9 – Comply or Explain
The ‘comply or explain’ approach is a regulatory framework used primarily in
corporate governance. Instead of enforcing rigid rules, it allows organisations to
either comply with a set of recommended principles or provisions or explain why
they have chosen not to comply. It recognises that one-size-fits-all governance
may not suit every organisation and allows flexibility where there is a suitable
justification for it.187 The Financial Policy Committee, a committee within the Bank
of England, is tasked with identifying and reducing risks to the UK financial system.
The FPC can issue recommendations to the Prudential Regulation Authority or the
Financial Conduct Authority. It makes these recommendations on a 'comply or
explain' basis. For example, if the FPC recommends restricting the proportion of
risky mortgages banks take on, regulators may choose not to comply but must
publicly explain their decision. This approach ensures that institutions remain
accountable while allowing for contextual flexibility.188 See Chapter 6 for further
discussion of corporate governance.

National coordination - Wales
134. There would be no need for a separate national coordination function
in Wales, given that a single cross-sectoral systems planner could
operate across the whole of Wales. In Wales, that single systems planner
would be accountable to the Senedd.
135. The Welsh systems planner should have the same core objectives and
remit as set out above. However, in Wales the model would need to reflect
the distinct environmental landscape and legislative frameworks. This could
include differences such as the impact of abandoned metal mines, and the
ways of working towards the sustainable development principle in the Well-

187 The Corporate Governance Institute, ‘What is comply or explain?’ (viewed 18 July 2025)
188 Bank of England, ‘Financial Policy Committee’ (viewed 18 July 2025)

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being of Future Generations (Wales) Act 2015. The plan should consider
Welsh priorities, align with and deliver against legal requirements set by the
Welsh Government.
136. Given it would operate across the whole of Wales, the Welsh systems
planner would need to ensure sufficient engagement at a regional and
local scale. For example, there could be an opportunity for the Welsh
systems planner to use Welsh Area Statements as a mechanism to develop
integrated planning at a regional level in Wales. Area Statements are plans
that coordinate efforts in a region to sustainably manage natural
resources.189 NRW produce Area Statements in collaboration with local
stakeholders. Some stakeholders have voiced concerns that the statements
are too high level, that they contain no clear mechanism for how to resource
delivery of their objectives, and that they lack a consistent approach.190 The
Welsh systems planner could play a role in supporting improvements to the
application of Area Statements across Wales. The Welsh systems planner
could have a formal function in co-developing or leading on the water
component of the statements. The Welsh systems planner could also
oversee greater development of catchment partnerships in Wales, building
on the ‘opportunity catchments’ which already exist.191 As noted above, there
would need to be formal cooperation agreements between the Welsh
systems planner and the English regional systems planners where the river
catchments cross the border.
Independence
137. There is an important choice to be made on whether the system
planners should be an independent function, outside the water
regulators or integrated within them. Alongside an independent chair, the
Commission believes systems planners in England and Wales should be
independent, with their own secretariats, drawing on the advice of the water
regulators but not part of them. This will enable them to be better placed to
take a cross-sector view and to draw on expertise across different
organisations to support joined-up planning. This will include making
challenging trade-offs, often between different organisations and their
objectives. Establishing an independent systems planner would involve the
separation of regulation and water planning functions. This could free up the
regulators’ capacity to focus on compliance and enforcement work, creating

189 The legal framework for Area Statements is established under the Environment (Wales) Act 2016
190 The Chartered Institute of Ecology and Environmental Management wrote to NRW to voice their
concerns on the Area Statements, 2023
191 Cyfoeth Naturiol Cymru Natural Resources Wales, ‘Area Statements and opportunity catchments’
(viewed 18 July 2025)

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a clearer vision and mission for both the regulators and for the systems
planners.
138. The regulator(s) would retain an important role alongside an
independent systems planner, including through interaction with the
planners to avoid being non-compliant and ensure that environmental and
economic regulatory expertise is factored in throughout plan development.
Regulators would continue to regulate delivery of water industry and other
schemes and projects within the plan, through the permitting and licensing
regime, and through the economic regulators’ oversight of business plan
delivery (see Chapter 7). Regulators would retain their discretion over
permitting and licencing, but would need to comply with the regional plan or
explain why they had not done so, as set out in paragraph 83.
139. There may also be a role for government in signing off the overall level
of ambition of a regional plan, and any particularly sensitive trade-offs
within it. While the National Water Strategy should provide guidance in this
regard, there are likely to be areas in which a specific, more granular
government view is needed.
140. In England independent system planners could be established as a
single body with eight regional systems planners, overseen by a
national coordinating function. This national coordination function could
be independent and be part of the same body as the regional planners, or it
could sit within Defra. The independent model would align with the precedent
set by the NESO and its forthcoming RESPs in energy. However, the
coordinating function in water would be much ‘thinner’ given that unlike
energy there is no need for a central operating function. In either case,
however, a new public body would be required, which would involve
transitional and ongoing administrative costs.
141. It is envisaged that the regional system planners would be staffed by
the transfer of staff who currently carry out the planning functions in
the regulators. However, there would be some financial costs
associated with establishing a systems planner. These could include
aligning terms and conditions and pensions. The creation of new systems
planning bodies will also likely require some overall increase in staff
headcount to ensure necessary expertise is present in all regions. While the
strategic board will not be comprised of full-time employees, the Commission
proposes that board members and the independent chair receive
renumeration for their time commitment, as well as for reasonable expenses
for travel and subsistence.
142. However, the Commission is aware of the current government
reluctance to establish additional public bodies. We have therefore

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considered an alternative model of systems planning that could be
established within the existing regulatory structure. The Commission’s view
is that a viable alternative option would be to establish regional systems
planning boards within the water regulator(s) or the Welsh Government in
Wales.
143. In England, under this option, regional system planners would still
have strategic boards, led by independent chairs appointed by the
Defra Secretary of State. This model would improve on the current system
by bringing all the relevant sectors and actors, particularly local authorities
and catchments, into the planning system. It could build on local catchment
partnerships and develop working groups in much the same way as the
independent planner. It would also make access to the regulators’ technical
expertise and coordination with their permitting and licencing functions
easier if they were within the same organisation. However, a key motivation
for regional system planning is to put decisions on regional water systems in
the hands of regional actors and the communities that live by and depend on
those systems. This is likely to be more challenging if the system planners
are integrated into national regulators.
144. The Commission's view is that, if this option is adopted, there would
need to be strong mechanisms to bolster the independence of the
system planning boards within the regulatory bodies. This is likely to
include establishing the regional planning boards and their duties and
functions in statute, ensuring that membership is independent of the
regulator, and giving the boards 'comply or explain' powers, including in
relation to the organisation in which they are housed. The policy committees
that sit within the Bank of England have been set up in this way (see Box 9).
However, given the importance of the regional and local connection, and the
greater variation of objectives within the bodies represented on the board,
regional water system planning boards would need more independent
chairmanship and membership than the committees within the Bank of
England.
145. There is a risk that operating within the water regulator would
undermine the systems planner’s cross-sectoral view. In England, the
merged water regulator would have certain sectors key to systems planning
outside of its direct regulation, with floods, for example, remaining within the
remit of the EA. The secretariat of the systems planner in England would
need to work closely with the remaining environmental regulator to ensure
cross-sector engagement. In future, it may make it more challenging to
integrate flood and water planning, if they sit within different regulators.

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Wales
146. In Wales, the systems planner could be independent, integrated within
the regulator, or sit within Welsh Government. The cases for the
independent and ‘integrated’, regulator-housed options in Wales largely
mirror those in England. However, given that there will be a single systems
planner in Wales, it may be more appropriate to integrate it into NRW, rather
than creating an entirely new structure for a single organisation. Unlike in
England, situating the systems planner for Wales within the Welsh
Government may also be an appropriate option to consider. Having a single
systems planner for Wales would mean that there is no division between the
national coordinator and the systems planner. The Welsh Government also
already convenes the existing Price Review Forum in Wales, which
coordinates between certain water stakeholders and determines priorities.
147. NRW would retain key functions that would not be present in a merged
water regulator in England, allowing it to take a more cross-sector
view. NRW would continue to cover the current EA functions, including
flooding, as well as the water functions which sit within NE in England. An
integrated system planner within NRW would be able to draw on this wide
range of internal expertise to take a more holistic view of the water system
when making decisions.
148. In assessing the best option for systems planners, the UK and Welsh
Government may wish to consult further. Following considered
assessment of the options, the Commission judges that independence is
preferable to integration of the systems planner into a regulator. However,
there are merits to both options, and areas in which more information would
support a decision. For example, decisions in this area will be affected by
decisions on the structure of the regulators which are covered in Chapter 4.
And the governments may wish to consider the resourcing needs of both
options in greater detail than the Commission has been able to in its limited
timeframe.
The 5-year planning cycle
Planners need to facilitate projects designed to deliver over the long term and
provide more certainty on future investment needs
149. In our Interim Report, the Commission determined that the current 5-
year period for setting water company bills is broadly appropriate. A
shorter period would lead to greater volatility and uncertainty, while a longer
period would very likely require more in-period adjustments as
circumstances change. Retaining the 5-year cycle helps give billpayers
stability. It also helps guide water companies on their budgets, performance
goals, and investment plans, which supports both customer and investor