Business owners are likely to have come across names such as Ofwat and Ofgem at some point in their business utility dealings.
Whilst Ofgem plays a key role in the regulation of the UK energy market, Ofwat has a fundamental influence over the UK’s water services.
In this guide, we’ll provide you with everything you need to know about Ofwat; including who they are, what they do and how they impact your business.
What is Ofwat?
Ofwat is the Water Services Regulation Authority in the UK. It is a non-ministerial government body that is responsible for the economic regulation of the privatised water and sewerage sectors throughout England and Wales.
Ofwat’s main purpose is to ensure that the water and wastewater companies that they regulate consistently meet the requirements of their licence and provide customers with effective and efficient service at an affordable and fair price.
How was Ofwat created?
Ofwat was formed in 1989 after the launch of the Water Act (1989), which made the then ten public water authorities private, creating 10 regional water companies. Ofwat’s powers and responsibilities are dictated by the Water Industry Act 1991.
Prior to 2006, Ofwat served as support for the Director General of Water Services. However, on April 1st 2006, the regulator took over all regulatory powers for the UK water and wastewater services.
What are Ofwat’s main roles and responsibilities?
As a regulating body, Ofwat has a number of roles and responsibilities within the UK water market. These include:
- Ensuring that all customers, both business and residential, get value for their money from water and wastewater services. Ofwat aim to keep water affordable for all, they have the authority to set limits on water prices.
- Encouraging competition within the water market for the best interest of customers throughout the UK.
- Making sure that all licensed water and wastewater companies abide by the regulations of their licence and effectively carry out all licensed activities.
- Ensuring that water companies do not display any undue preference or discrimination when setting charges or in any other dealings.
- Making sure that all water companies can appropriately finance all of their functions.
- Seeking to protect the environment and its resources, whilst ensuring that all water and sewerage companies do their part to preserve the environment for future generations.
- Encouraging all water companies to add greater public value; working to aid customers, communities and the environment.
How much authority do Ofwat have?
As the regulator for UK water services, Ofwat holds a significant amount of power and authority within the industry. This includes the authority to deal with and resolve complaints, disputes and company failures.
Ofwat conduct investigations into any water or wastewater company that appears to be breaching the terms of their licence. If a breach is found, Ofwat will deal with the issue accordingly. Sanctions can include anything from informal warnings to enforcement orders and financial penalties.
Ofwat has statutory enforcement powers under the Water Industry Act 1991. They also possess powers under the Competition Act 1998 and Articles 81 and 82 of the EC treaty.
Ofwat will intervene on an issue within the market where it is best placed to do so, and all of their investigations and enforcements are based on evidence.
Examples of penalties issued by Ofwat include its 2019 imposing of a £126 million penalty on Southern Water for their sewage treatment failure and their apparent deliberate misreporting of performance. Southern Water also received another fine of £90 million in July 2021 for unpermitted sewerage discharges.
Who does Ofwat regulate?
Here are some of the markets that Ofwat regulate:
- UK Water Market
- Business Retail Water Market
- New Appointment and Variations (NAVs)
- Connections Market
- Bioresources Market
- Water Bidding Market
How is Ofwat funded?
Ofwat is funded by the licence fees paid by its regulated companies. Ofwat is accountable to Parliament for the money they spend. They may also be required to provide their financial information to the Treasury, the National Audit Office and the Public Accounts Committee.
Switching Business Water Suppliers
At Business Energy, all of the water suppliers we work with are fully licensed and regulated by Ofwat. You can therefore have peace of mind that we’ll be able to provide you with an excellent deal for your business water.
Try our free online quote tool today to find the cheapest deal available for your business water supply.