Defra environmental targets consultation: Environment Agency response

Section 1: Planning to meet future water challenges

1.1 This methodology

This methodology sets out in one place – for the first time – the overarching process for designing, developing, and delivering the water industry national environment programme (WINEP) for England. It has been developed jointly by the Environment Agency, Department for Environment, Food and Rural Affairs (Defra), and Water Services Regulation Authority (Ofwat) with the support of others through the WINEP taskforce.

The target audience is water industry practitioners in the Environment Agency, water companies and third parties interested in the co-design, co-delivery and or co-funding of projects to deliver environmental outcomes through WINEP actions.

The Environment Agency, Defra and Ofwat are issuing this methodology following consideration of the responses they received to the WINEP methodology consultation Review of the water industry national environment programme (WINEP) – consultation document. The responses to the consultation are summarised in Review of the water industry national environment programme (WINEP) – summary of consultation responses (Environment Agency, December 2021).

The Environment Agency owns the methodology. For further information and associated guidance please email Price_Review@environment-agency.gov.uk

The term ‘water companies’ or ‘companies’ within this methodology refer to the wholesale water only, and wholesale water and sewerage companies operating wholly or mainly in England. Reference to ‘water and sewerage companies’ includes companies providing both services.

1.2 The challenge

The UK government has declared a climate and environment emergency. If the water sector continues to operate as usual, by 2050 some of our rivers could have up to 80% less water in summer, and it will not be possible to meet the growing demands of people, industry, and agriculture. There will be even greater pressure on the quality of rivers, lakes, estuaries, and wetlands from pollution. At the same time people’s expectations of their local environment have increased, for example, more people want to swim outdoors or spend time near a local river.

Water companies have a primary role in protecting and enhancing the environment and thereby improving the lives of those within the communities they serve. Water companies have been challenged by the UK government to create an industry that:

  • provides resilient, safe, and affordable water supply and wastewater service for today’s users and future generations
  • provides a thriving natural environment with increased environmental value, clean rivers and a sustainable eco-system
  • consumers trust and delivers an excellent day to day service, support for vulnerable consumers and acts in the long-term interests of society and the environment 

There are also challenges around restoring good ecological health to chalk streams and reducing the impact of storm overflows on the natural environment.

The environmental challenge for the sector is huge. Through the WINEP actions there are opportunities to enhance the environment, create resilient communities, and support economic growth.

1.3 The ambition

There is a collective ambition for the actions within the WINEP to enable greater delivery. More for the environment, for customers and for communities, reflecting society’s high expectations and the UK government’s own ambition to leave the environment in a better state for the next generation.

The UK government’s 25 Year Environment Plan sets out an ambition to improve the environment in a generation, including achieving the aim of clean and plentiful water. The Environment Act 2021 sets out specific outcomes we expect water companies to achieve in the next price review.

The Environment Agency’s ambition is for a water environment that is cleaner, healthier, and managed in a way that is more resilient to floods and drought and better supports people, wildlife, and the economy.

Actions by water companies have the potential to greatly enhance the natural environment and support sustainable growth. Equally, their operations can have a detrimental effect on the quality of the natural assets (such as rivers) that water company customers, and wider society, rely on.

Section 2: The environmental framework

2.1 The strategic policy statement

Defra’s strategic policy statement to Ofwat sets out the UK government’s priorities, including environmental priorities, for Ofwat’s regulation of the water sector in England.

2.2 The water industry strategic environmental requirements

The Environment Agency and Natural England jointly issue the water industry strategic environmental requirements (WISER) to provide a strategic steer to water companies on the environment, resilience and flood risk obligations and requirements for business planning purposes.

2.3 The water industry national environment programme

The WINEP, and its predecessor the national environment programme (NEP), have been important mechanisms for delivering benefits to the natural environment. The investment through the WINEP is substantial – £25 billion since 1989 – and between 2020 to 2025 it will account for approximately £5.2 billion of asset improvements, investigations, monitoring, and catchment interventions.

The primary role of the WINEP is to provide information to water companies on the actions they need to take to meet the environmental legislative requirements that apply to water companies in England.

The ‘what’ of environmental water policy that needs to be delivered through the WINEP is determined by the UK government outside of the WINEP process. It is identified through UK legislation, and includes meeting the legally binding targets around water quality, quantity, and biodiversity set out in the Environment Act 2021.

The Environment Agency has developed the WINEP methodology process in line with the UK government’s 5 environmental principles for building a greener future with the aim of offering the best opportunity to achieve environmental improvement.

It is important to note that water sector environmental expenditure is greater than the WINEP outcomes. Expenditure on maintenance, and supply and demand funding, through the price review process are equally important for protecting the environment.

The Environment Agency needs to demonstrate how WINEP delivers benefits to the environment for every pound invested by water companies. An evaluation framework will be developed to understand the actual cost-effectiveness of WINEP actions. This will inform the implementation and evolution of current and future actions in the WINEP.

There are a number of other frameworks, plans and strategies which should be considered during the development of the WINEP.

2.4.1 25 Year Environment Plan

The WINEP should reflect the ambitious nature of the UK government’s 25 Year Environment Plan including environmental sustainability and resilience, support for nature recovery, use of natural capital in decision-making, use of a catchment approach and, importantly, delivery of net gain for the environment.

2.4.2 River basin management plans

River basin management plans establish an integrated approach for the protection and sustainable use of the water environment. They set the environment quality objectives for groundwater and surface waters (including estuaries and coastal waters) and summarise the programmes of measures needed to meet these objectives. Water companies must ensure that current and future activities, such as abstraction or the return of treated wastewater, support the achievement of these objectives and prevent deterioration in water bodies.

2.4.3 Water resource management plans

Water resource management plans (WRMPs) ensure that water resources are adequate to meet the present and future demands of customers. Companies must plan to make sure that there is a reliable water supply for people and businesses, and to protect the environment. The solutions needed to achieve WRMP outcomes form the supply-demand component of business plans and need to balance managing demand, improving how water resources are allocated and developing new resources. Enabling sustainable abstraction, managing the risk of deterioration, and serious environmental damage are an integral part of the WRMPs. For the first time, the WRMP must also accommodate the regional water resource plans as required in the national water resources framework. This sets a longer planning horizon and will incorporate strategic resource options for 2050 and beyond as well as a regional environmental destination.

2.4.4 Drainage and wastewater management plans

Drainage and wastewater management plans (DWMPs) are being developed to ensure the sustainability of drainage and wastewater management infrastructure and the services it provides to customers and the environment. They will set out how water and sewerage companies intend to extend, improve and maintain a robust and resilient drainage and wastewater system over the long term.

Draft DWMPs will be published for consultation in June 2022. the final DWMPs will be published in March 2023.

DWMP cycles are designed to align with the price review cycle. The first cycle of DWMPs is non-statutory. However, DWMPs are prepared in line with the framework for the production of Drainage and Wastewater Management Plans commissioned by Water UK and Defra’s Guiding Principles (currently in draft). These documents set out clear expectations of DWMPs including how organisations with interests and responsibilities relating to drainage, flooding and protection of the environment work together to produce a co-created plan.

The draft DWMPs, which will include your long-term adaptive plan, and how you will address strategic risks and uncertainties, will inform your PR24 business plans. The WINEP for 2025 to 2030, alongside the supply-demand and capital maintenance elements of the water companies business plans, will implement the first delivery phase of the DWMP. The DWMP will provide an evidence base that supports investment need.

From 2024 onwards the second cycle of DWMP production will commence. The Environment Act 2021 makes DWMPs statutory for the second cycle of these plans.

2.4.5 Flood risk management plans

The Flood Risk Regulations 2009 require the Environment Agency and lead local flood authorities to do a statutory review of flood risk management plans (FRMPs) every 6 years. The plans explain the risk of flooding and set out how risk management authorities will work with stakeholders and communities to manage flood risk.

The second cycle FRMPs will contain objectives and specific actions, known as measures, setting out how risk management authorities will manage and plan for significant flood risks between 2022 and 2027.

The plans will support achieving the goals of the National Flood and Coastal Erosion Risk Management Strategy for England, for example by identifying integrated water management and nature based solutions.

2.4.6 Drinking water safety plans

Drinking water safety plans ensure the safety of a drinking water supply through a comprehensive risk assessment and risk management approach encompassing all steps in water supply from catchment to consumer. The development of the WINEP should take account of these plans, where appropriate, to support the mitigation of any drinking water quality risks.

2.4.7 Local authority plans

The development of the WINEP should ensure the environment is not compromised by future development ambitions set out in local authority plans.

2.4.8 Local Nature Recovery Strategies

The Environment Act 2021 will introduce Local Nature Recovery Strategies in England. Where appropriate, the WINEP should support the opportunities and priorities identified in Local Nature Recovery Strategy areas.

2.4.9 Environmental Land Management scheme

Farmers and land managers will be able to benefit from and work across 3 new Environmental Land Management schemes:

  • Sustainable Farming Incentive
  • Local Nature Recovery
  • Landscape Recovery

These schemes will pay farmers and land managers in return for providing environmental outcomes such as:

  • habitat protection and creation
  • natural flood management
  • water quality
  • carbon capture
  • air quality
  • biodiversity recovery
  • animal health and welfare

Defra have started the piloting and rolling out Environmental Land Management schemes in advance of live offers in 2024. These schemes will also be joined up other interventions such as Biodiversity Net Gain.

2.5 Supporting guidance

The methodology is supported by additional technical documents. These are listed below and are available on request from Defra, the Environment Agency or Ofwat.

2.5.1 Defra

  • the strategic policy statement sets out the UK government’s priorities for Ofwat’s regulation of the water sector in England
  • the ‘Water Abstraction Plan 2017’ (updated September 2020) sets out how the government will reform water abstraction to protect the environment and improve access to water

2.5.2 Environment Agency

  • WISER – Environment Agency and Natural England strategic steer to water companies on the environment, resilience and flood risk for business planning purposes
  • WINEP driver guidance – sets out how environmental legislation and related UK government priorities should be translated into WINEP actions
  • WINEP options development guidance – sets out the process water companies are expected to follow to identify the best value WINEP option to achieve the WINEP requirements and contribute to the WINEP wider environmental outcomes
  • WINEP options assessment guidance – sets out how the Environment Agency assesses whether the options development guidance has been followed by water companies to ensure the WINEP requirements and wider environmental outcomes can be achieved
  • WINEP profiling guidance – provides information on the WINEP delivery deadlines for environmental outcomes
  • WINEP action specification form guidance – sets out the detail of the WINEP action to ensure the WINEP requirements and wider environmental outcomes can be achieved
  • WINEP spreadsheet – the WINEP actions are recorded and shared in a Microsoft Excel spreadsheet specific to each company which defines what they must include in their business plans
  • Environment Agency position statements – set out the agreed position on technical areas for example: catchment nutrient balancing, and catchment permitting
  • WINEP measures sign off, technical review and audit guidance
  • WINEP alterations guidance
  • Water and sewerage companies in England: environmental performance report, Environment Agency, October 2020

2.5.3 Ofwat

Further details of the development of the PR24 approach are available on Ofwat’s website, on the 2024 price review page.

Section 3: WINEP obligations and drivers

3.1 WINEP obligations

The WINEP is the programme of actions water companies need to take to meet statutory environmental obligations, non-statutory environmental requirements or delivery against a water company’s statutory functions.

3.1.1 Statutory obligations

Statutory obligations (S) arise from legislative requirements and the need to comply with obligations imposed directly by statute or by permits, licences and authorisations granted by the Secretary of State, the Environment Agency or other body of competent jurisdiction. Other statutory obligations include ministerial directions and meeting specific planning requirements. While it is important to understand the costs and benefits of actions needed water companies must complete WINEP actions to fulfil statutory obligations.

3.1.2 Statutory plus obligations

Statutory plus (S+) obligations are set out in primary or secondary legislation and can include an assessment of benefits and, in some cases, an additional step of affordability testing.

Where an action is considered disproportionately expensive to meet statutory plus obligations, alternative objectives, or extended timescales to meet the objectives, may be set.

3.1.3 Non-statutory requirements

Non-statutory (NS) requirements enable water companies to go beyond the minimum legal requirements to deliver an environmental need where there is customer support. Actions to meet non-statutory requirements may be required to meet the UK government’s environmental ambition.

There are 2 types of non-statutory requirements.

  1. Actions to deliver additional or enhanced environmental outcomes in relation to a statutory scheme that go beyond the statutory requirements of that scheme. For example, reaching excellent bathing water status beyond the required level of sufficient status, or delivering the same standard against the statutory obligation, but with a greater contribution to the WINEP wider environmental outcomes (natural environment, net zero, catchment resilience and access, amenity, and engagement). The WINEP wider environmental outcomes are discussed in Section 4.

  2. Actions that are not required by primary nor secondary legislation, but for which there is Environment Agency published WINEP driver guidance.

3.2 WINEP drivers

The Environment Agency and Natural England translate legislation and UK government priorities into WINEP drivers. A WINEP driver links the statutory obligation (S or S+) or the non-statutory (NS) requirement to a water company’s actions.

Each WINEP driver is described by supporting WINEP driver guidance specifying what actions are statutory (S), statutory plus (S+) and non-statutory (NS). The WINEP driver guidance explains what water companies should do to establish the need for action for a specific driver.

Section 4: Components of the methodology

The methodology is expected to make real changes to the options proposed by water companies to address environmental challenges and increase flexibility.

It is designed to:

  • focus delivery on outcomes including the WINEP wider environmental outcomes
  • have a longer-term focus
  • aid adoption of a more systems and catchment-oriented approach that furthers more innovation and company collaboration, including facilitating a greater use of nature-based solutions
  • support co-design, co-delivery, and co-funding of solutions
  • make the best use of, and improve available data

4.1 WINEP time horizon

WINEP actions should be developed as part of a long-term enhancement strategy. Companies should plan to a 25-year time horizon to enable options with a longer lead-in time to be included in future programmes of work more effectively. While it may not be possible to identify the actions needed, we expect to see the decision points for this longer-term programme of work in business plans.

For PR24, actions should be included in the WINEP where progress is required over the next 5 years. WINEP driver guidance will identify where it is appropriate to profile actions beyond this.

4.2 WINEP wider environmental outcomes

To achieve the collective ambition for the water environment water companies need to undertake actions to meet statutory obligations, and non-statutory requirements, whilst maximising wider environmental benefits.

Water companies are expected to take account of the contribution their proposed options make to the WINEP wider environmental outcomes.

As the WINEP wider environmental outcomes are not primary drivers for environmental action, we will not produce WINEP driver guidance for them. These include the following.

Natural environment outcomes

Improvements to the natural environment, in addition to those required by specific drivers, through the protection restoration and enhancement of the environment, biodiversity, and habitats.

Net zero outcomes

Contributions to achieving a balance between the amount of greenhouse gas (GHG) emissions put into, and the amount taken out of, the atmosphere. The net embedded and operational GHG emissions of actions should be taken account of.

Catchment resilience outcomes

Contributions to catchment flood and or drought resilience, better surface and groundwater management, restoring or increasing environmental capacity, and securing sustainable alternative water resources.

Access, amenity, and engagement outcomes

Contributions to improving access to, amenity of, and engagement with the natural environment to support customer and community wellbeing.

The 4 WINEP wider environmental outcomes will be considered equally. However, the costs attached to delivering the ‘access, amenity and engagement’ WINEP wider environmental outcome benefits must be clearly evidenced and should not be a material driver of overall costs. Similarly, the associated benefits accounted for in the option development should be reasonably modest.

4.3 3-tiered outcomes approach

This methodology introduces a 3-tiered outcomes approach to improve the line of sight. It adds transparency to the process and provides a better understanding of the WINEP outcomes for the environment, customers, and communities.

Where required, water company actions need to be permitted under the appropriate regulatory regime. Companies still need to provide Ofwat with information on costs and benefits as part of the price review process. This is set out in the WINEP options development guidance.

Examples of tier 1 outcomes, tier 2 goals and tier 3 outputs are set out in the WINEP driver guidance.

4.3.1 Tier 1 outcomes

Tier 1 outcomes are set at the highest level and describe a water company’s contribution to the 25 Year Environment Plan goals or a wider government steer. They link to WISER expectations.

Each WINEP action links to a tier 1 outcome described within the WINEP driver guidance documents.

4.3.2 Tier 2 goals

Tier 2 goals are the specific elements required to deliver an outcome. For example, the water company’s contribution to reducing nutrient loads or removing barriers to fish migration across a catchment. All tier 2 goals contribute to a tier 1 outcome.

4.3.3 Tier 3 outputs

Tier 3 outputs are the site or asset specific actions that are required to deliver the tier 1 outcomes and tier 2 goals.

4.3.4 Setting the tiers

The Environment Agency expects companies through their options development to set out the tier(s) they are planning against in the WINEP options assessment reports.

To encourage the use of less traditional interventions, the Environment Agency may – at its discretion – allow WINEP actions that are not linked to a specific tier 3 output and are instead set as a tier 2 goal or a tier 1 outcome (for non-permitted actions). Sufficient evidence will need to be provided by the company through the WINEP options development process to support the benefits of setting an action at tier 1 or tier 2 level.

4.4 Co-design, co-delivery, and co-funding

The Environment Agency, Defra and Ofwat encourage water companies to work in partnership and coordinate with organisations, both inside and outside the sector, to deliver common aims.

Water companies should consider WINEP options that are co-designed, co-delivered and co-funded, working towards an aspirational target of 20% co-funding of non-statutory actions and seek further co-funding beyond this level at their discretion. To deliver a fair share of costs for customers and other stakeholders, the proportion of co-funding secured through external stakeholders should be at least equal to the proportion of benefits those stakeholders can expect to receive through the action. The Environment Agency will measure progress against this ambition for PR24 through the WINEP Option Assessment Report set out in the WINEP options development guidance.

Water companies should not use customer money to pay for work beyond their own functions. However, by working in partnership with third parties picking up a fair share of costs, there is the potential to deliver better outcomes overall. Solutions delivered in partnership allow companies to leverage input from third parties.

Funding should be allocated such that each partner pays its fair and efficient share of the costs of solutions. This should consider the relative benefits of the solution and the incremental costs to water companies and third parties, compared to a solution the water company would implement to address only its requirements.

Though we expect an increasing role for partner organisations in the delivery of WINEP actions, water companies will remain fully responsible and accountable for the delivery of their statutory obligations. Water companies’ customers will not be expected to meet any shortfall in funding caused by a co-funder withdrawing support.

The Environment Agency expect water companies to have plans to make sure they can deliver on all statutory obligations if co-funding or support from a co-delivery partner does not materialise. Such issues will not be considered an acceptable justification for failure to meet a delivery date or to request a delivery date extension beyond any delivery date based on legislation.

4.5 Catchment and nature-based solutions (C&NBS)

There should be a clear commitment to pursue C&NBS wherever they can deliver all or part of the required environmental outcome. Proposed C&NBS should have a plausible and feasible mechanism for delivering the requirements and should maximise biodiversity gains and improvements to ecosystem services.

Water companies should consider C&NBS as part of their WINEP options development. Advice to support development of well-designed C&NBS solutions is provided in the WINEP options development guidance.

4.6 WINEP options development and options assessment

The WINEP options development guidance expands on the requirements set out in this methodology. It describes what the Environment Agency and Ofwat expect of water companies when developing WINEP options.

The WINEP options development guidance sets out the 6 principles water companies should follow when developing the WINEP options. It also sets out the evidence required to support the options development and sets out how to evaluate costs and benefits of WINEP options to support consistency across water companies.

The Environment Agency will use the WINEP options assessment guidance to assess the quality of the evidence water companies provide to support their options development, including their best value option.

4.7 Managing uncertainty

In previous price review planning periods (PR14 and PR19) the Environment Agency set out guidance to manage uncertainties resulting from the mismatch in timescales between the price reviews and river basin planning cycles.

A traffic light system was used to reflect the different levels of uncertainty associated with the development of actions, economic appraisal, and ministerial decisions associated with the WINEP drivers.

We do not expect to use this managing uncertainty approach for PR24.

Section 5: Summary of the WINEP stages

The WINEP process is divided into 6 stages. It starts with consideration of the legislative framework and related ministerial and UK government steers and ends with the reporting of successful outcomes by water companies to show they have delivered environmental improvements.

Stage 1 – setting the WINEP framework

There are several layers to the overall WINEP framework. They are:

  • legislative requirements and related ministerial and UK government priorities
  • the strategic policy statement
  • the WISER
  • the WINEP methodology

Supporting guidance enables the WINEP methodology to be implemented.

Stage 2 – collaboratively identifying risks and issues

This is a collaborative stage to identify the environmental risks and issues that will be addressed through the WINEP and involves the Environment Agency, water companies and other environmental stakeholders, including Natural England.

Stage 3 – proposing solutions

This stage focuses on developing options to resolve the environmental risk and issues identified in Stage 2. Water companies lead on the options development and should follow the WINEP options development guidance when developing solutions.

Stage 4 – assess proposals

At this stage the Environment Agency, with support from others including Natural England, assesses the water companies’ proposals resulting from the Stage 3 – proposing solutions. The assessment considers whether the options development guidance has been followed and ensures the WINEP requirements and WINEP wider environmental outcomes can be achieved through their proposals. Further detail is provided in the WINEP options assessment guidance.

Stage 5 – price review

This stage is the Ofwat led price review. There are important links between the price review and the WINEP methodology. In this stage Ofwat determines the cost allowances for the water companies for the delivery of the WINEP.

Stage 6 – delivery

The final stage is the delivery of the WINEP actions by water companies and partners. The Environment Agency track and record progress and sign off delivery of the WINEP actions.

Section 6: Stage 1 – setting the WINEP framework

There are several layers to the WINEP framework. They are:

  • legislative requirements and ministerial and UK government priorities
  • the strategic policy statement
  • the WISER
  • the WINEP methodology

These documents, published by Defra and the water regulators, inform this stage, and enable the WINEP planning process.

6.1 Approach

The strategic policy statement sets out the UK government’s priorities, including environmental priorities, for Ofwat’s regulation of the water sector in England. The WISER sets the strategic ambition for the actions in the WINEP. The WINEP methodology is the process by which the water companies and their partners, including the water regulators, identify actions to go into the programme.

In applying the WINEP methodology due regard should be made to existing policy statements. For example, under the Environment Agency’s application of the polluter pays principle for water quality planning, the water company will remain accountable and responsible for delivering their proportionate component of the required pollution reduction.

Water companies should include all WINEP actions in their business plans.

The WINEP development and Ofwat’s PR24 processes will remain related but separate. The Environment Agency will not fetter the discretion of Ofwat’s decisions on PR24 through decisions made on the WINEP.

6.2 Who is involved

The water regulators and Defra set the framework for the WINEP working in consultation with water companies and other stakeholders.

The Environment Agency, Defra, in consultation with Natural England as appropriate, will develop the associated guidance documents.

6.3 Expected outcomes

The framework includes, the strategic policy statement, the WISER, the WINEP methodology, associated WINEP guidance and the WINEP template.

This framework enables the WINEP planning process.

Section 7: Stage 2 – collaboratively identifying environmental risks and issues

This is a collaborative stage to identify the environmental risks and issues to be addressed through the WINEP. The Environment Agency, water companies and other environmental stakeholders, including Natural England, review the current state of the environment and the impact of water company activities.

Understanding the environmental risks and issues determines which WINEP driver(s) it is appropriate to use.

7.1 Approach

Stage 2 identifies environmental issues that need addressing and risks that require further monitoring and investigation.

The Environment Agency leads on identifying the environmental risks and issues in collaboration with water companies, Natural England, and other stakeholders.

The environmental risks and issues allow water companies and regulators to identify where action is required to deliver compliance with statutory and statutory plus obligations, and will also identify where the environment is not meeting stakeholder expectations and so where non-statutory actions may be proposed.

The link between a water company’s activity and a failure to meet its environmental obligations should be confirmed by robust data and supported by modelling (where appropriate).

The evidence required for each risk and issue, and where that can be found, is set out within the relevant WINEP driver guidance. Water companies may wish to supplement this with evidence from other sources including their own monitoring and third-party data.

Where evidence isn’t available to confirm the extent of the impact of the water company’s activity then an investigation and or monitoring may be an appropriate action.

Companies should reference the outputs of other plans in identifying risks and issues that need addressing and seek to ensure that delivery of outcomes is aligned across planning frameworks. For example, DWMPs set out risks and issues related to drainage and wastewater management that have been identified in collaboration between the water company and its stakeholders.

There will be iteration and refinement of the risks and issues throughout the WINEP planning process.

7.2 Who is involved

Where the Environment Agency and Natural England hold the data and evidence this will be shared with water companies, so the risks and issues can be identified and agreed collaboratively. For example, Natural England’s database of threats and remedies will be used as an input to identify risks and issues.

Water companies will need to gather the supplementary evidence, where relevant, to confirm the risk and issue and to establish a proven link between their activity and the pressure on the water environment.

Water companies should work collaboratively with the Environment Agency, Natural England, and other stakeholders (for example local authorities, risk management authorities (RMA), community groups, environmental non-governmental organisations, catchment based approach organisations, other businesses) to gather the evidence and data and characterise pressures on the water environment within the catchments water companies operate in.

7.3 Expected outcomes

Water companies should understand how the environmental risks and issues relate to their assets (including any natural assets within their landholdings) and activities, and the dependency on use of and influence over natural assets.

Water companies should have clarity of the dependencies and interactions with other plans that will need to be considered for the development of the WINEP.

The output from this stage should be used to inform WINEP options development.

Section 8: Stage 3 – proposing solutions

Water companies will develop options, in line with the WINEP options development guidance, to resolve the environmental risk and issues identified in Stage 2.

8.1 Approach

Water companies are required to present robust evidence to support their options development. Water companies are asked to present qualitative, quantitative, and financial information, and to assess the potential impacts and effects of different options on natural assets and services and the benefits they provide. The aim should be to identify the preferred option, at an appropriate scale, to achieve the WINEP requirements.

8.2 Who is involved

Water companies should engage with stakeholders throughout the process. They should share this guidance to help other interested parties in co-designing, co-delivering and co-funding the WINEP actions.

8.3 Expected outcomes

WINEP options development reports and WINEP option assessment reports will be produced by water companies and submitted to the Environment Agency.

The preferred options will be uploaded to the company-specific ‘collaborative’ WINEP spreadsheet found on the price review collaborative SharePoint library.

Section 9: Stage 4 – assessing proposals

At this stage the Environment Agency, with support from others including Natural England, assesses the water companies’ preferred options, the least cost option, and any alternative options, resulting from Stage 3 in line the WINEP options assessment guidance.

The Environment Agency assesses whether water companies have applied the WINEP options development guidance to ensure the WINEP requirements and WINEP wider environmental outcomes will be achieved through their proposals.

9.1 Approach

Assessing proposals is where the WINEP preferred option identified through Stage 3 – proposing solutions, is assessed against the option development criteria, set out in the WINEP options development guidance.

The assessment will confirm the WINEP actions that can progress to Stage 5 – price review, the development of water company business plans, which are subject to Ofwat’s price review process.

The assessment of the preferred option will:

  • assess the extent to which the WINEP options development principles have been applied
  • confirm the preferred option is likely to allow statutory obligations, or non-statutory requirements to be met
  • determine if the preferred option provides ‘best value’ resulting in a wide range of benefits, or whether an alternative option provides better value
  • ensure the option development decisions taken by a water company are transparent and supported by robust evidence and data
  • confirm the WINEP agreed actions
  • provide the basis for the WINEP action specification form, an operating techniques agreement, or a permit change, where relevant

9.2 Who is involved

The Environment Agency assesses the proposed options with Natural England and other water regulators as appropriate.

9.3 Expected outcomes

When the Environment Agency has completed the option assessment, and confirms the action can proceed, it is moved to the agreed action WINEP template. The Environment Agency will carry out a consistency check with the objective of ensuring WINEP driver guidance has been appropriately applied and statutory obligations for the WINEP have been met.

At this point the WINEP options move to Stage 5 – Price Review, to be considered by Ofwat as part of the price review process.

Section 10: Stage 5 – price review

In the price review stage, Ofwat determines the funding that water companies will have to complete the agreed WINEP.

10.1 Approach

The efficient level of funding for delivering statutory obligations will be determined by Ofwat through the price review process. To ensure that customers are protected, Ofwat will assess and challenge the proposed costs of all WINEP actions to ensure customers only fund the efficient costs of delivery.

The price controls specify the revenues companies will be allowed to collect, and the outcomes they are required to deliver for customers, communities, and the environment. The price controls also consider how best to manage the funding for actions included in the WINEP where there is uncertainty around the need for, or amount of, expenditure required.

For non-statutory expenditure to be funded by customers it must relate to activities carried on land water companies own, the catchment in which they operate, and or the areas in which they exercise their functions.

Ofwat will scrutinise water company business plans to ensure that non-statutory WINEP actions satisfy this condition and the evidential requirements for expenditure classified as ‘enhancement’ by Ofwat.

For the 2019 price review (PR19) the evidential requirements for non-statutory expenditure were included in ‘Delivering Water 2020: Our final methodology for the 2019 price review. Appendix 11: Securing cost efficiency’, Ofwat, December 2017. Ofwat will develop the criteria that will need to be evidenced through its PR24 methodology the draft of which will be published in summer 2022.

Ofwat will take account of co-funding in the design of the price controls and will reflect this desire for more partnership delivery while ensuring customers are adequately protected. Ofwat will consider how it can incentivise partnership working including in terms of co-design, co-delivery, and co-funding.

Ofwat will consider what mechanisms are needed to incentivise the delivery of WINEP outcomes. This could take the form of outcome delivery incentives, price control deliverables with associated financial incentives or some other mechanism.

10.2 Who is involved

Water companies will need to include the agreed WINEP options in their business plans. Ofwat will assess the business plans to set the price control determinations.

Where non-statutory actions, or best value options, are agreed over least cost approaches water companies will need to provide evidence of customer support for expenditure for WINEP actions that goes beyond delivery of statutory obligations.

Water companies will also need to engage with co-funders in the development of their WINEP proposals and ahead of submitting business plans so that they can demonstrate how co-funding can be assured. They will also need to propose an approach to ensuring customers are protected if co-funders do not provide the requisite funds.

10.3 Expected outcomes

PR24 will determine funding for expenditure for the financial years 2025 to 2030 – aligned with the period covering firm actions in the WINEP.

Section 11: Stage 6 – delivery

Water companies are responsible for the delivery of WINEP actions working collaboratively with their partners. The Environment Agency assures the WINEP actions are delivered to the agreed timeframe and environmental obligations are meet.

Where necessary, the Environment Agency will issue permits under the appropriate regulatory regime.

11.1 Approach

During the delivery of WINEP there will be regular liaison between water companies and the Environment Agency to discuss progress, risks and issues associated with delivery of the WINEP programme and to identify any alterations.

The WINEP template, which holds the WINEP actions, is maintained as a ‘live’ dataset on the Environment Agency’s SharePoint online site, which is accessible to water companies, Defra, Ofwat and Natural England.

The Environment Agency has a process for requesting, agreeing, and recording changes to the WINEP called the WINEP alterations process.

The WINEP measures sign off, technical review and audit guidance will be used to give assurance that the environmental obligations as set out in the WINEP are completed as planned.

11.2 Who is involved

Day to day interactions in the delivery stage occurs between water companies and the Environment Agency, involving the relevant national and area teams.

Depending on the scale and scope of the alterations, Ofwat and Defra may also be involved in the decision-making process.

11.3 Expected outcomes

Expected outcomes from this stage include:

  • maintaining the WINEP dataset
  • reporting progress against delivery of the WINEP actions
  • tracking and reporting WINEP delivery in a transparent and auditable manner

WINEP actions will come from other strategic plans, such as WRMPs, river basin management plans and DWMPs. These plans are not all produced at the same time, which means the actions that emerge from them are not all available to go into the WINEP at one time. The WINEP is therefore an iterative process on a rolling timeline.

Milestones in the WINEP process must be adhered to, to ensure regulators have sufficient time and evidence to consider the WINEP options, make decisions, and allocate funding so delivery deadlines are met.

As this a new way of working for PR24, there may be further iterations required to improve the WINEP process. Therefore, while we have set out how we expect the WINEP to progress we recognise that not all these stages will happen in parallel and there will be some overlap of the stages.

The current PR24 WINEP timetable is:

  • Stage 1: November 2020 to February 2022
  • Stage 2: complete by 30 June 2022 (subject to the availability of evidence*)
  • Stage 3: complete by 30 November 2022
  • Stage 4: complete by 18 March 2023

Autumn 2022: The Environment Agency will present an initial view of the WINEP for those areas where data is available.

31 March 2023: The Environment Agency makes available the version of WINEP to be used for business plan development to water companies.

  • Stage 5: March 2023 to March 2025

2 October 2023: Date proposed by Ofwat for submission of business plans by water companies.

31 March 2024: Updated version of the WINEP created for Ofwat’s final determinations.

  • Stage 6: April 2025 to March 2030

1 April 2025: WINEP goes live and is managed under the alterations process.

*We recognise that because of the COVID-19 pandemic some investigations required to develop options in Stage 3 have been delayed. This will result in some data not being available until later in the WINEP development process

Section 13: Glossary

WINEP

The water industry national environment programme. It sets out the programme of work for water companies in England to avoid deterioration in and improve the environment that is associated with the Environment Agency’s jurisdiction.

Obligation

Something that water companies are required to do or achieve by legislation.

Statutory obligation

Statutory obligations are obligations on the water companies set out in primary or secondary legislation. Water companies must carry out actions identified in the WINEP to fulfil statutory obligations. These actions are not subject to a cost benefit test to determine whether they should be taken.

Statutory plus obligation

Statutory plus obligations are obligations on the water companies set out in primary or secondary legislation but that include an added element of cost benefit assessment, and in some cases an additional step of affordability testing. In cases where action is considered disproportionately expensive to meet statutory plus obligations, alternative objectives or timescales to meet them may be set.

Non-statutory requirement

Non-statutory requirements are those that are not required by primary or secondary legislation, but for which there is Environment Agency published WINEP driver guidance.

Non-statutory requirements included in the WINEP are actions the companies have customer support to do that go above and beyond their statutory obligations. There may be a public need or desire but this may not be underpinned by a specific Act or piece of legislation. These actions to meet non-statutory requirements may also be required to meet the UK government’s environmental ambition.

There are 2 types of non-statutory requirements:

  1. Actions to deliver additional or enhanced environmental outcomes in relation to a statutory action that go beyond the statutory requirements of that action. This could include for example reaching excellent bathing water status beyond a required level of sufficient status, or delivering the same standard against the statutory obligation, but greater contributions to one of the four identified wider environmental outcomes – natural environment, net zero, catchment resilience or access, amenity and engagement.

  2. Actions that are not required by primary nor secondary legislation, but for which there is Environment Agency published WINEP driver guidance.

Driver

An environmental reason for action. A driver is essentially a code used within the WINEP that makes the link from the statutory obligation or the non-statutory need to water company actions.

Statutory driver

A driver that is linked to a statutory obligation.

Statutory plus driver

A driver that is linked to a statutory plus obligation.

Non-statutory driver

A driver that is linked to a non-statutory requirement. Non-statutory drivers must be linked to the delivery of water companies’ legal functions.

WINEP Driver guidance

A document that explains what water companies should do to meet the need for action in relation to a specific driver.

Risks and issues

The environmental problems or potential problems which require resolving.

Solutions

The solutions to the risks and issues identified, that is the actions required to deliver the required environmental outcomes.

Wider environmental outcomes

The 4 wider environmental outcomes that water companies seek to deliver when developing and assessing options for the WINEP: natural environment, net zero, catchment resilience and access, amenity and engagement.

Natural environment

Improvements to the natural environment through the protection restoration and enhancement of the environment, biodiversity and habitats. The net impact of actions should be taken account of when assessing WINEP options.

Net zero

Contributions to achieving a balance between the amount of GHG emissions put into, and the amount taken out of, the atmosphere. The net embedded and operational GHG emissions of actions should be taken account of when assessing WINEP options.

Catchment resilience

Contributions to catchment flood and or drought resilience, better surface and groundwater management, restoring or increasing environmental capacity, and securing sustainable alternative water resources.

Access, amenity, and engagement

Contributions to improving access to, amenity of and engagement with the natural environment to support customer and community wellbeing. This is an important outcome, but we do not consider that access, amenity, and engagement should be a significant driver of costs in proposed options nor a significant driver of the benefits when assessing which options to implement.

Tier 1: Outcomes

The water company’s contribution to delivering an outcome for a specified location. Any geographical area may have multiple tier 1 outcomes.

Tier 2: Goals

The goals are the specific elements required to deliver an outcome. All tier 2 goals will contribute to a tier 1 outcome.

Tier 3: Outputs

The outputs are the site or asset specific actions required to deliver the higher tiers of environmental outcomes. These may be in relation to a statutory or non-statutory driver. Often the Environment Agency carry out regulation at the tier 3 level.

WINEP actions

The actions are the line items in the WINEP spreadsheet that water companies are required to deliver. These can be defined at the tier 1 outcome, tier 2 goal, or tier 3 output levels. These include:

  • actions (to prevent deterioration)
  • actions (to improve)
  • investigations
  • monitoring

Note: actions are not synonymous with tier 3 outputs, as while some actions will be defined as tier 3 outputs, other actions may be defined as tier 1 outcomes or tier 2 goals.

WINEP spreadsheet

The Microsoft Excel spreadsheet that sets out all the WINEP actions that water companies will be held accountable to deliver.

Operating techniques agreement

An operating techniques agreement is a document linked to the Environmental Permitting Regulations water discharge activity permit through the operating techniques condition. It is a flexible document which typically includes (but is not limited to including) baseline information, targets, monitoring requirements and compliance rules.

Pilots

Implementation of test actions that are innovative and new to the water sector. These are trials to determine the efficacy of actions. They may be small or large scale.

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