The UK’s water companies will be encouraged to trade water in a bid to boost much-needed supplies under radical proposals being drafted by industry regulator Ofwat.
Draft proposals to incentivise trading will be published by Ofwat this July ahead of the industry’s next price review in 2019.
Trading, which comes as fears rise of a drought this year, is also being examined by the government as Defra consults on Ofwat’s responsibilities.
Water levels have plunged to a worrying degree after a dry winter left some rivers and reservoirs lower than normal for the time of year, the environment agency said yesterday.
The agency added that the problem was most acute in the south east where supplies are expected to come under increasing pressure from population growth over the next 20 years.
Water trading is designed to move water from areas where it is more plentiful to those where it is scarce. Trades, seen as an alternative to developing water resources, are governed by long-term special agreements such as the one between Elan Valley in Wales and the Birmingham area.
Ofwat said: “Water trading can benefit the environment and customers as it can allow more expensive investment in developing new resources within a company’s area to be deferred, reducing future upward pressures on bills.”
In preparation for its next price review, the regulator is bringing in a market information platform on trading opportunities.
Ofwat predicts trading will lead to around £800m worth of savings.