How a regulatory system works in practice
A Water Services Association case study

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Page 3: Interaction between regulators

Water Services Association 3 Image 7There is an argument which says that the activities of the regulators of the various utilities - water, gas, electricity, telecommunications - should be closely co-ordinated. This has not happened yet. However, it is vital for the water industry’s three regulators to work closely together, to allow each to fulfil their own responsibilities, with a minimum of conflict with the others.

So, while OFWAT’s responsibility is for prices and quality of customer service, the Director General must take account of the obligations put on water companies to comply with stringent quality, health and environmental standards, both as regards drinking water and sewage disposal. These obligations are imposed by law and it is the job of the Environment Agency and the Drinking Water Inspectorate to see that they are met.

Most of the standards stem from directives drawn up by the European Commission and agreed by member countries of the European Union, including our own. There will inevitably be creative tension between the regulators, when the focus of one is to keep the lid on prices, while the focus of the others is spending money to improve standards. What has to happen is to strike a balance between these various objectives. In the last resort, it is for the Government to dictate what that balance should be.

Water Services Association | How a regulatory system works in practice