Ofwat launches consultation on changes to key environmental performance measures
Ofwat has launched a consultation on proposed amendments to three key environmental performance commitments for water companies in England and Wales, following updates to the way pollution and discharge performance are assessed by environmental regulators.
The consultation, published on 29 October 2025, seeks views on how to adjust the metrics for total pollution incidents, serious pollution incidents, and discharge permit compliance under the regulator’s PR24 price control framework, which covers the period from 2025 to 2030.
Aligning with new regulatory methods
The proposed changes stem from the Environment Agency’s and Natural Resources Wales’s introduction of a new Environmental Performance Assessment (EPA) methodology, known as version A, released on 15 October 2025. This replaces version 11, which had been used to set final performance commitments in Ofwat’s PR24 determinations earlier this year.
Because the updated EPA alters how pollution incidents and permit compliance are defined and recorded, Ofwat says adjustments are necessary to maintain consistency and fairness across the industry.
“Our aim is to ensure that performance commitments remain accurate, comparable and continue to drive the right incentives for companies to protect the environment,” the regulator said in its consultation document.
Key proposed changes
The most significant revisions apply to the total pollution incidents commitment. Under the new EPA, companies will no longer be able to downgrade certain incidents to “no impact” status, meaning more events will be classified as category 3 (minor impact) pollution.
In England, dry-day spills recorded through event duration monitors will also now count as pollution incidents for the first time. In Wales, dry-day spills will be reported but excluded from the formal performance measure.
Ofwat proposes to update the definition of the metric to reflect these changes and to reset performance benchmarks annually, based on the median number of incidents per 10,000 kilometres of sewer across the sector.
The regulator also plans to adjust the associated financial incentives, recalculating outcome delivery incentive (ODI) rates and introducing tighter caps and collars to manage volatility caused by the revised reporting rules.
For serious pollution incidents—those causing major or significant environmental harm—Ofwat does not propose to alter performance levels or incentives, as the EPA update does not materially change how such events are recorded. However, it will apply a new exclusion for incidents where assets are submerged due to flooding.
The discharge permit compliance measure will also be updated to align with the new EPA approach, which now uses rolling-year assessments and includes additional permit conditions. Ofwat does not expect these adjustments to significantly affect company performance or financial exposure.
Timing and next steps
If confirmed, the updated commitments would take effect from 1 April 2026, with the 2025–26 reporting year continuing to use the current methodology.
Ofwat has invited responses to the consultation by 10 December 2025, after which it will publish its final decisions.
Implications for the sector
The proposed changes are intended to ensure regulatory alignment but could have notable implications for company performance data and incentive payments.
Industry observers have highlighted potential challenges, including the difficulty of comparing performance across years and between England and Wales, given differing approaches to dry-day spills. Others have raised concerns that annual median benchmarking may create a “moving target”, potentially complicating long-term performance planning.
Environmental groups, meanwhile, are likely to welcome the inclusion of dry-day spills in English companies’ pollution totals, viewing it as a step towards greater transparency in monitoring sewage discharges.
Ofwat said it would consider all feedback before finalising the changes, emphasising its commitment to ensuring “robust, fair and transparent” environmental performance measures.
The consultation can be viewed here:
