Ofwat proposes new licence obligations for water companies to prove asset management is fit for purpose

Ofwat has proposed a new licence condition under which water companies must prove their asset management systems are fit for purpose, covering infrastructure across its full lifecycle from acquisition through to disposal.

The condition would set clear and strengthened expectations on the standards that companies must demonstrate and the evidence they must provide to show their asset management processes are fit for purpose. Acceptable evidence could include ISO certification or a qualified independent third-party assessment, with Ofwat prepared to hold companies to account if the required accreditation is not in place and a licence condition is breached.

Ofwat’s sector analysis indicates uneven asset management standards, citing the 2021 Asset Management Maturity Assessment (AMMA) which showed significant variation across companies and slower progress since. Embedding these requirements in licences aims to keep asset management high on the sector agenda and to support long-term resilience by treating good asset management as a fundamental obligation.

The consultation launch explained that effective asset management helps prevent ageing pipes and equipment from becoming bursts, outages and pollution incidents, while directing investments to where they have the greatest impact and delivering value for customers on bills. Implementation would be via a graduated regulatory response for non-compliance, ranging from information requests and time-bound improvement plans to enhanced monitoring and formal regulatory action for serious or persistent breaches.

Executive commentary highlighted the risk of poor asset management being invisible until a critical asset fails, with real-world disruption illustrated by recent outages in Tunbridge Wells. The White Paper accompanying the proposal stressed stronger asset maintenance and assurance around asset management capability, reinforcing the case for higher sector standards and resilience.

Two sector examples cited by Ofwat illustrate practical progress in asset management:

• Affinity Water has adopted a proactive, data-driven maintenance approach, including attaching QR codes to assets to improve data capture, a criticality framework to prioritise high-impact work, a digital spares catalogue, and extensive maintenance training. The shift toward planned maintenance increased from 84% to 94%, and condition-based monitoring on large pump sets reduced mechanical and pump failures from 1.11% to 0.5% over two years. There have been no customer supply interruptions longer than three hours due to asset failures in the last 12 months.
• United Utilities’ Dynamic Network Management programme aggregates data from more than 25,000 sewer sensors, enabling early visibility of emerging issues. Using AI to identify patterns, the approach has helped prevent more than 8,000 blockages, 3,000 flooding incidents and over 400 pollution incidents in the last five years, in line with ISO 55001 compliance. A further 10,000 sensors are being installed to extend the network’s visibility.

The licence condition is planned to come into force in 2028 following consultation, policy development and company adoption. Ofwat will conduct a sector-wide Asset Management Maturity Assessment (AMMA) in 2026 to establish a baseline of asset management capability and to guide future interventions; early insights are expected in early 2027.

The consultation is open to water companies, their customers, environmental groups and other interested parties. Responses are due by 5pm on Friday 17 July. The consultation paper and supporting guidance are provided to participants in the process, with physical and other channels established for responses.

For discussion and inputs, Ofwat invites engagement from industry participants as part of the consultation process.