Under plans for a new industry watchdog, water companies will be required to carry out infrastructure “MOTs” to avoid major failures.
Ministers are set to unveil a raft of reforms in Parliament as they press ahead with a major regulatory shake-up that will see the abolition of Ofwat and the merger of the current system of overlapping oversight by four different bodies into a single regulator.
The Water White Paper, which will be published on Tuesday morning, will outline the powers envisaged for this new watchdog, which aims to put failure prevention first and strengthen accountability.
Under the proposals, water companies will have to carry out health checks on their infrastructure to proactively identify collapsed pipes, pumps or problems at wastewater treatment plants before they fail.
The hope is that risks such as South East Water's burst pipes in cold weather, which recently left thousands of homes without supply, will be identified in advance.
A chief engineer will also sit inside the new water regulator for the first time in two decades to carry out practical checks on infrastructure, so that companies are “not doing their own homework”.
Ofwat is unlikely to be formally scrapped before 2027, and the process to set up the new regulator will be complex, meaning it is unclear when it will begin operating.
But the Government will say on Tuesday that it will set out a transition path in the coming months and a new water reform bill to introduce the legislation needed for the system to come into force.
Environment Secretary Emma Reynolds said: “These are once-in-a-generation reforms for our water system: strict oversight, real accountability and no more excuses.
“Water companies will have nowhere to hide from poor performance, customers will get the service they deserve and investors will see a system built for the future.
“This builds on the tough measures we have already taken, from record investments to banning unfair bonuses.”
Other measures of the Water White Paper will include the creation of specific teams for each company.
This will replace the current “one size fits all” approach, aiming to give the new regulator a better understanding of how each company operates.
And where they perform poorly, the regulator will be able to implement tailored “performance improvement regimes”, meaning it will be able to act more quickly to correct failures.
Elsewhere, the document outlines new “unannounced” powers for the watchdog to monitor water companies' security and emergency preparedness for events such as attacks on infrastructure or contingency plans for supply problems.
The document will also outline clear lines of responsibility for senior executives in measures similar to those seen in the financial sector.
The planned changes come as part of the Government's response to public fury over rising bills, sewage pollution and big bonuses for employers.
Ofwat currently oversees how much water companies in England and Wales can charge for services; the Drinking Water Inspectorate ensures that the public water supply is safe; while the Environment Agency and Natural England have regulatory functions to monitor the impact of companies on nature.
Regulators have faced intense criticism for overseeing companies over years in which they paid off shareholders and racked up huge debts, while aging infrastructure crumbled and sewage spills soared.
Philip Duffy, chief executive of the Environment Agency, called the Water White Paper “a key milestone in changing our water system”.
“During the transition to the new regulator, our priorities remain unchanged,” he said.
“We are focused on delivering our key services: carrying out 10,000 inspections of water company assets this year and working with our regulatory partners, planners, water companies, farmers and environmental organizations to protect and improve our water environment.”
Chris Walters, acting chief executive of Ofwat, said: “The creation of a new water regulator for England will bring renewed focus, improve the sector for customers, investors and the environment, and rebuild trust.
“In the meantime, our work continues.
“We are already working closely with (the Department of Environment) and our partner regulators as the Government develops the new body, ensuring the sector moves towards a more integrated and resilient future.”
Tim Farron, environment spokesman for the Liberal Democrats, said the White Paper “does not go far enough to ensure the fundamental regulatory reform that was promised”.
“We must completely reform the way water companies operate,” he said.
“Liberal Democrats are calling for a new ownership model where water companies are mutually owned by customers and professionally managed.”
James Wallace, chief executive of River Action, said many of the measures announced are “welcome steps” but warned that “significant gaps remain” in areas such as triggers for special administration, a commitment to restructure investment and ownership of companies and greater ambition to tackle agricultural pollution.
“The publication of the Water White Paper indicates that the Government recognizes the magnitude of the freshwater emergency, but lacks the urgency and bold reform to address it,” he said.
A spokesperson for Water UK, which represents the industry, welcomed the White Paper but said the focus “must now move from diagnosis to delivery”.
“Our country will not have the environment it wants or the economic growth it needs until a new water regulator is established,” they said.
“We can't afford to have a system that everyone knows has failed make more long-term decisions.”
