Regulators’ solutions to current water challenges

A panel of highly experienced regulators proposed a wide range of pragmatic solutions to current water sector challenges, at a discussion moderated by AquaFed at the recent IWA Water Horizons 2025 event, in London.

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In terms of incentives, in some countries regulators are enabled to put risk/reward (and penalties) frameworks in place. In Italy for example, regulators have incentivised utilities to form joint ventures to valorise sludge, which accelerates progress on various EU Directives. However, other governments have not enabled regulators in this way and don’t have money available for innovation funds. But other simpler incentive methods can be effective – for example an annual ‘Oscars’ for the best performing utilities.

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Tariff setting, another key issue for regulators, also shows widespread differences from country to country. In Portugal for example, the regulator can only issue a non-binding opinion to public utilities which means many final decisions on tariffs become politically motivated rather than based on the investment needed. This has the knock-on effect of delaying much needed innovation. Equally, performance KPIs are not legally binding. To get around this problem and to make sectors more resilient, policy and legislative solutions are needed that mandate the achievement of required standards with stricter and more binding laws.

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There was also discussion among regulators that water is simply far too undervalued – particularly to industry and agriculture but all non-domestic users. There was agreement that these buyers of water understand this and actually would be prepared to pay more for water, which in turn could help cross-subsidise domestic users on the lowest incomes.

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The regulators speaking at this session were:
•    Marcus Rink, Chief Inspector, Drinking Water Inspectorate (Defra, UK)
•    Prof. Andrea Guerrini, Commissioner, ARERA & Vice-President, WAREG (Italy)
•    Prof. Vera Eiró, CEO, President of the Board (Presidente do Conselho de Administração), ERSAR (Water and Waste Services Regulation Authority), President WAREG, Portugal

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Regulatory issues also featured in other sessions moderated by AquaFed. In a discussion on implementing adaptive water strategies, the issue of the quality of reused water for reservoirs and groundwater recharge was raised. In England for example, the water companies need to treat wastewater to potable standard before it can be put into reservoirs. There was clear agreement in the audience that such high standards are unnecessary and make water reuse a costly option.

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The desperate need for more formalised governance arrangements around catchment management was also raised. Sarah Jenner, Head of Integrated Water Management, United Utilities showed the extensive efforts and leadership from her company to partner with a wide range of stakeholders, to progress nature based solutions (NBS) for climate adaptation. With more formalised arrangements in catchments, utilities could go much faster and further to implement NBS.