.jpg)
America splits the job between state and federal government. Economic regulation, which is to say who sets prices and approves investment, happens at state level through public utility commissions. Environmental protection is federal, run by the Environmental Protection Agency under the Clean Water Act, which sets the framework for pollution discharges and surface water quality.
The UK does it almost the other way round. Ofwat is a single national economic regulator for England and Wales, with the Water Industry Commission for Scotland and the Utility Regulator in Northern Ireland covering the rest. Environmental regulation is separate again and sits with the Environment Agency in England and Natural Resources Wales in Wales.
That structure was built up over decades, and it is now being reviewed. The Independent Water Commission, chaired by Sir Jon Cunliffe, published its interim report on 3 June 2025 and set out the case for change across five areas: strategic planning, legislative clarity, regulatory oversight, company governance and infrastructure resilience.
Figure 1: The five areas where the US and UK water sectors diverge, used as the framework for this publication.
Source: MCC Economics.
America has 49,599 community water systems. The UK has fewer than 30. Almost every other difference follows from that one.
Most of those systems are small. They range from municipal utilities to co-operatives and investor-owned companies. Just over half of them, 26,727, serve between 25 and 500 people each, and between them those systems reach 1.4 percent of the population. At the other end, 472 systems serve more than 100,000 people each and cover 47.3 percent.
Table 1: Size categories of community water systems in the United States.
Source: MCC Economics.
England and Wales look nothing like that. Fewer than 30 companies hold appointments, each with a monopoly over a defined region.
Figure 2: The regional monopoly areas of the water companies in England and Wales.
Privatisation in 1989 moved every water company in England and Wales into private ownership. Dŵr Cymru, Welsh Water, is the only one that operates under a not-for-profit holding company. Scotland and Northern Ireland kept their water in public hands.
Which model performs better is still argued over. The Commission sidesteps the usual framing:
Two pieces of research on scale are worth reading next to it. Tynan and Kingdom, writing for the World Bank in 2005, found that small municipal providers tend to carry higher costs per customer. Ferro, Lentini and Mercadier, surveying the literature in 2011, found efficiency gains from scale for populations between 100,000 and one million.
In England and Wales one regulator sets prices for everyone, on a five-year cycle. Ofwat's periodic reviews decide customer bills by working out allowances for operating costs, capital investment and the weighted average cost of capital, which is the blended return a company is allowed to earn on the money invested in it.
America has no national economic regulator. Prices are set state by state, and most of that regulation deals with one company at a time rather than the industry as a whole, which lets decisions follow local conditions.
The Commission argues that England and Wales need both approaches at once, rather than choosing between them:
England is moving towards the regional planning America has always had. The Commission wants regional arrangements in England that pull investment together at river basin level, across sectors rather than company by company.
North Sussex is the example the Commission gives. Local planning authorities there are bound by water neutrality rules, introduced by Natural England to protect habitats, which stop new development increasing groundwater abstraction. Schools and housing have been delayed for years, against a background of long under-delivery in Southern Water's water resources plans. Nobody is clearly in charge of resolving it, so the burden has landed on councils and developers who hold few of the relevant levers.
American planning is local and regional as well, mostly because there is no national grid of water mains to plan around. Decentralising England would create problems of its own, and the interim report does not judge the American record either way.
Not in England and Wales. Under the Water Framework Directive Regulations the aim is for 75 percent of surface water bodies in England and 94 percent in Wales to reach Good Ecological Status by 2027. At the last classification, 2019 in England and 2021 in Wales, 16 percent of English water bodies and 40 percent of Welsh ones met the standard. There is no published plan for what happens after 2027, and the Commission says the target will be missed.
America writes its standards federally. The Environmental Protection Agency sets them under the Clean Water Act, covering surface water quality, stormwater and drinking water safety. States then run the permitting and enforcement. States can adapt how they do it, but they cannot lower the national goals.
More than you would expect. Both are short of investment for ageing pipes. Both face customers who struggle to pay. Both have to adapt to a changing climate. Both are working out how to bring other sectors into water planning, and how to give local and regional voices a say.
The shared problem right now in England and Wales is that nobody knows what condition the assets are in:
The Commission wants one infrastructure resilience framework for every company in England and Wales. It would set resilience standards, oblige companies to collect and report asset data, and give the regulator a closer view of each company's assets when it sets allowances and targets.
Fifty separate experiments, some of which have been running long enough to judge. Fifty states have answered the same questions about regulation, ownership and operation in fifty different ways. Local system innovation, regional planning partnerships and different ownership structures all exist somewhere in America, in practice rather than on paper.
Both sectors are changing, and there is something in this for the Americans too. This publication is the first in a series comparing them, taking the Commission's report as the starting point.
I was delighted that MCC's work was completed on time, and within budget, helping us deliver important changes and improvements, to the benefit of our stakeholders. MCC's report is published on the CCC website.
I am delighted to recommend MCC Economics. Specifically, I worked closely with PJ, who helped us with our Nuclear and CCUS projects. PJ helped us develop new policies and answer questions from our stakeholders. His support helped us deliver important changes and improvements, to the benefit of our stakeholders.
MCC Economics has helped us better understand the most important issues for our stakeholders, including: charges, shareholder returns, debt payments and inflation impacts.
I am delighted to recommend PJ and his team at MCC Economics. We've been working together on National Policy Statements to help meet net zero targets for 2030 and 2050. We initially appointed MCC Economics to support us on offshore wind consultation analysis and have recently reappointed MCC Economics to undertake a larger consultation analysis role across all sectors, including hydrogen, CCUS and networks. I can confirm that PJ and his team have shown excellent spreadsheet skills, alongside very good project management, planning and analysis skills, helping us deliver important changes, and continuous improvements, to the benefit of our stakeholders.
I am delighted to recommend PJ and his team from MCC Economics. They helped us with our price controls for Heathrow airport and for NATS (En Route) plc (the air traffic services provider). Specifically, the MCC team helped us deliver important changes and improvements to our financial models and supporting policy documents, to the benefit of our stakeholders.
I am delighted to confirm that I worked with PJ on a retail project in 2015. The project helped stakeholders understand electricity costs and charges. Specifically, the project helped us explain to stakeholders, internally and externally, why electricity charges differed across the regions (GB, NI & Ireland). PJ was a key member on the project team, which helped deliver changes and improvements in the understanding of energy retail.
.png)
Evidence-based analysis for transparent, defensible, and effective decision-making.
© All rights reserved – MCC Economics 2026.
.jpg)
.jpg)