Debate on the performance of South West Water

Regulatory and policy framework

There are three main regulatory bodies that monitor the performance of water companies in England:

• Ofwat, the economic regulator;
• The Environment Agency, the environmental regulator; and
• The Drinking Water Inspectorate, the drinking water quality regulator.

As part of its role as economic regulator Ofwat limits the prices that water companies can charge customers. Prices are reviewed every five years and, during the price review process, water companies commit to delivering certain service levels. Additionally, water companies make performance commitments covering various areas, including customer service and environmental protection.

The government provides policy direction to Ofwat through strategic policy statements, which set long-term priorities for the water industry. Ofwat must act in accordance with the statements when carrying out its duties, including when agreeing performance commitments with water companies.

Water companies must also comply with a range of environmental legislation and targets. For example, the Storm Overflows Discharge Reduction Plan requires water companies to eliminate the adverse environmental impact of sewage discharges by 2050.

Assessments of South West Water’s performance

Ofwat and the Environment Agency publish annual reports measuring water companies’ performance against their performance level commitments and environmental obligations.

There are eleven regional water and wastewater companies, and five water only companies in England and Wales. South West Water provides water and wastewater services to customers in Cornwall, Devon, parts of Somerset and Dorset and the Isles of Scilly.

Ofwat’s assessment

In its most recent report, covering performance in 2022-23, South West Water was ranked within the ‘average’ category of water companies by Ofwat across a range of performance indicators. This an improvement on the 2021-22 performance report, where South West Water was ranked as ‘lagging behind’ other companies.

South West Water is also the only water company to report that its per capita consumption level (a measure of water use by household) is below its 2019-20 three year average level. This is still below the performance commitment threshold for reducing consumption but is significant progress when compared to other companies.

South West Water is ranked as a ‘top performer’ for its response to internal sewer flooding and achieved its performance commitment in relation to this. It has also achieved its performance commitment for water and wastewater treatment works, which means that it complied with the Environment Agency permit conditions to limit discharges of non-compliant water.

It has continued to improve its performance in relation to wider pollution incidents, reducing these by 28% in 2022, however it requires further improvement to meet its performance commitment level.

Additionally, Ofwat does have an open enforcement case with South West Water in relation to the accuracy of its reported leakage data and per capita consumption data. The outcome of this investigation is not yet known and may impact the above report.

EA assessment

In the Environment Agency’s latest assessment of water company performance for 2022, South West Water received a two star rating (company requires improvement). This was a marginal improvement on South West Water’s 2021 one star rating.

The EA highlighted the number of pollution incidents as a particular area of concern, including two serious pollution incidents (comprising category one incidents, which have serious, extensive or persistent impacts on the environment, and category two incidents, which have a lesser, yet significant impact on water quality).

As South West Water is a company with a smaller asset base size, two serious pollution incidents is sufficient for it to be classified as amber status, which means that its performance is below target (see EPA metrics for further details).

Related links

The following research products may also be of interest:

• Commons Library briefing, Economic regulation of the water industry in England and Wales, (June 2020).
• Lords Library article, River pollution and the regulation of private water companies, (February 2024).
• Commons Library article, What is the government’s plan to reduce sewage discharges? (September 2022).
• Commons Library briefing, Q&A: Storm overflows discharge reduction plan, (October 2022).
• Commons Library briefing, Flood risk management and funding, (February 2024).