British water utilities regulator Ofwat is of the opinion that regional water companies can streamline and improve the efficiency of their operations by trading water supplies and extracting useful energy from sewage. According to Ofwat, these measures could save more than 1 billion pounds.
According to Ofwat, increased water trading across regions will ensure that resources are deployed more efficiently in view of an expected 20% increase in the population over the next two decades, most of it in more arid areas of the country.
According to Ofwat Chief Executive Cathryn Ross, “If we can encourage companies to innovate, and to truly understand what customers want now and in the future, we will be in a strong position to maintain trust and confidence in this vital public service.”
Ofwat also said that companies need to look into exploring methods of producing natural gas from wastewater sludge to be used either for generating electricity, to be fed into the gas network, or to be used for their own needs.
Ofwat is the regulator that limits the tariffs water suppliers are allowed to charge customers by using pricing formulae that are set every 5 years. It has stated that in the future it aims to rather use the consumer price index (CPI) as its measure of inflation rather than the retail price index (RPI) which it is currently using in its calculations.
British water companies are not too happy and their shares fell with this announcement as if the new measures are implemented it will mean that the tariffs they will be allowed to charge as from 2020 will be lower.
According to Whitman Howard analyst Angelos Anastasiou, “These proposals are not particularly positive for the sector in terms of potential returns. However, it is early days, and the actual outcomes will doubtless evolve before the final positions are formulated.”
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