.jpg)
This MCC paper explores what resilience really means for water systems, and why the UK can learn from US tools and case studies as pressures from climate change and ageing assets intensify. Discover actionable strategies to strengthen planning, regulation, and long-term service reliability.
Starting from themes raised by the Independent Water Commission (IWC), the paper frames resilience as the ability to absorb shocks (like droughts and floods) while adapting to long-run challenges. It identifies shared UK/US issues, ageing infrastructure, fragmentation, and extreme weather, and explores US case studies (including consolidation approaches and more hands-on supervisory regulation) that could inform UK policy and regional planning. The note emphasises that resilience must be tackled at system and governance levels, not treated as a narrow technical afterthought.
Resilience in the water sector has been a point of attention for quite some time. Climate change, population growth, and ageing infrastructure place unprecedented pressures on water systems in both the US and the UK. These challenges highlight the shared need to ensure safe and reliable water services while also protecting environmental and social outcomes.
On their recently published interim report, the Independent Water Commission (IWC) noted concerns with the UK water systems, such as supply chain capacity for necessary investments and management arrangements that do not fully address the regional water systems demands.
We use the IWC report as a starting point to explore how solutions already tested in the US could help build a more resilient water sector in the UK, drawing parallels and highlighting opportunities for cross-Atlantic learning.
A number of stakeholders, including the NIC, some water companies and supply chain firms have expressed serious doubts as to whether the supply chain has the capacity to undertake the huge increase in investment set out in Price Review 2024. This is in part due to the pressure on some parts of the chain from other sectors where major investment plans are in train. But they also point to the scale of the jump in the level of water industry investment. For example, the combined Water Industry National Environment Programme (WINEP) and National Environment Programme (NEP) averaged around £5.4 billion in the price reviews from 2004 to 2019 before jumping fourfold to almost £24 billion in Price Review 2024 (2022/23 prices).
At present, there is a complex patchwork of system planning and management arrangements in England and Wales that does not effectively bring together all the demands on regional water systems, the challenges that need to be met and all the actors that have an impact on water. The Commission has heard that local voices are lost in the system.
Water system resilience extends beyond ensuring pipes and treatment plants are in good condition. It’s about the ability of water systems to absorb shocks – like droughts and floods – and adapt to long-term challenges. In the UK, the IWC frames resilience as a “strategic imperative”, highlighting that it must be addressed at the highest levels of planning and regulation, not just as a technical afterthought. In the US, resilience emerges through a complex interplay of federal environmental standards and state-level economic regulation, requiring an ongoing balancing of affordability, environmental protection, and infrastructure renewal.
While regulatory frameworks differ, some challenges are remarkably similar.
In the UK, the IWC exposes a clear recognition that asset health is not well understood and that renewal plans are often driven by past failures rather than proactive assessments. In the US, ageing infrastructure is a major concern, particularly for small systems that lack the resources for regular maintenance and renewal.
The Commission has heard that there is a lack of underlying condition data for water company assets in England and Wales. Given that the underlying legislation and regulatory framework is not fully prescriptive, English and Welsh companies have taken different approaches to managing their large and complex asset bases. To fill mapping gaps, for instance, the Commission has heard that one company follows a “map as you go” principle to build up knowledge during routine maintenance, while another maps reactively only on failure of the asset.
While Ofwat have published a roadmap for improving the understanding of asset health, it is not mandatory for companies, and it is not clear to what extent companies are engaging. Moreover, although Ofwat noted that they had collected asset condition data on 70% of assets in Price Review 2024, these are at least partially based on failure metrics alone (such as sewer collapses, mains repairs and unplanned outages) rather than providing a prognostic assessment of asset health.
The below figure shows the difference in pipe age between Thames Water and Severn Trent Water assets, with Severn Trent having a younger average age of pipe, suggesting that companies will face different challenges on asset maintenance going forward due to their asset endowment.
IWC interim report page 54, June 2025
One of Ofwat’s concerns brought up in the IWC report was that the UK water sector experiences fragmented planning and decision-making, complicating coherent responses to environmental and supply challenges. Similarly, in the US, many states like Georgia and North Carolina have thousands of small systems that struggle with staffing, investment, and ensuring affordability for customers.
The UK and Welsh governments have sought to provide strategic direction on growing environmental, social, and financial pressures and demands on the overall water system – including in the Water Strategy for Wales (2015) and the UK Government’s Plan for Water and its Environmental Improvement Plan, both published in 2023. However, the Commission has heard that these plans have not effectively articulated prioritisation or provided accountability mechanisms to ensure they are delivered. Ofwat has commented that, historically, “investment in the sector has been the result of fragmented water company planning and prescriptive environmental investment programmes with relatively little strategic direction from Government.”
In England, existing strategies have focused heavily on narrow targets, processes and policy decisions, and have not effectively considered costs, articulated priorities or set out system-wide outcomes. Importantly, they contain little-to-no guidance on how regulators should strike a balance between potentially conflicting targets and outcomes, for example, how the regulatory system should balance affordable bills for customers with enabling water companies to deliver the investment needed to meet required environmental standards.
In the United States, 83% of community water systems serve fewer than 50,000 people. Despite this high percentage, these smaller sized systems serve only 8% of the population. In comparison, the remaining 17% of community water systems consists of larger water systems that serve over 250 million people. The majority of community water systems serving fewer than 10,000 people use ground water as their source. Most Americans are served by community water systems that serve greater than 100,000 people and use surface water as their source.
The UK’s National Infrastructure Commission (NIC) has warned that in the next 30 years, there is a one-in-four chance of significant water supply disruptions due to climate pressures. In the US, states such as North Carolina and Indiana are increasingly focused on drought resilience and future demand management to prepare for similar climate- driven challenges.
Equally, there are growing environmental, demographic and financial pressures on the water system. For example, the National Infrastructure Commission (NIC) estimates there is a 1 in 4 chance over the next 30 years that large numbers of households in parts of England will have water supplies cut off for an extended period due to severe drought.
The US water sector offers several illustrative case studies and strategies for dealing with water system resilience:
The California Public Utilities Commission (CPUC) has worked to consolidate small, under-resourced water systems unto larger companies, to improve resilience and equity, when these are in the best interests of customers.
Many communities throughout California are served by very small privately-owned or public water utilities. Some of these small providers have aging, inadequate infrastructure and are either failing, or are at risk of failing to meet the state’s standards for clean and safe drinking water. In many cases, the customers of at-risk small water utilities are themselves more vulnerable, making addressing their needs an environmental and social justice priority.
One of the potential solutions to this widespread challenge is for a larger, financially healthy water utility to purchase the smaller, at-risk utility and to continue serving its customers. The CPUC works closely with the State Water Resources Control Board to facilitate such acquisitions when they are in the best interests of customers.
The California Water Association summarised water acquisitions and consolidations in 2017, suggesting that the total number of investor-owned water utilities had decreased.
Rami Kahlon, CPUC Water Division Director, noted that there have been 34 acquisitions/consolidations by regulated water utilities since 2007. Of this total, 17 were acquired by other regulated water utilities, 10 by municipal or public agencies and seven by, or were incorporated into, mutual water companies.
He explained that acquisitions by regulated water utilities were governed by the Public Water System Investment and Consolidation Act of 1997, Public Utilities Code Sections 2718-2720, which among other things, uses “fair market value” as the starting point for determining the rate base value of an acquisition. The CPUC followed up the 1997 law with a 1999 decision on “Guidelines for the Acquisition and Mergers of Water Companies.”
Source: California Water Association
Sewer IOUs
Source: California Water Association
North Carolina’s Utilities Commission is notable for its more hands-on approach. It engages directly with smaller utilities to understand local challenges and support better solutions.
Many small water systems in Georgia and North Carolina face limited customer bases and aging inherited infrastructure. These challenges are similar to the UK’s concerns about fragmented small system planning, as mentioned in the IWC report.
Pennsylvania American Water is a large utility that provides comprehensive water and wastewater services. Its scale helps support long-term investment, better operations, and greater system stability.
The UK is moving towards catchment-based regional water system planning. This aims to overcome fragmentation by involving local authorities and stakeholders in decisions about investment and environmental protection.
In the Commission’s view, there is, for England, a strong case that the current system planning functions should in future be carried out by better and stronger regional water system planning arrangements that involve all the sectors that have an impact on quality and quantity of water in a regional water system, including local authorities. This will enable a more comprehensive approach to addressing the various sources of pollution that are damaging the water environment. The Commission is exploring a range of options for how such arrangements might best be organised. They could, for example, involve committees within an existing regulatory body or more freestanding bodies. They should be clearly connected to local voice and draw on local catchment-based partnerships. It is crucial that such regional water system arrangements have real authority in relation to water industry investment and to water related resources directed at other sectors.
Source: IWC interim report, page 8, June 2025
A map of the five regional water resources groups from Environment Agency 2020.
Source: Environment Agency 2020
Under the National Framework for Water Resources, set out by the Environment Agency, each regional group will produce a Regional Water Resources Plan. The purpose of these plans is to better understand and address the environmental and water resource needs of a region.
This is important because it allows strategic solutions to be developed across the country, with collaboration and management at a regional scale, rather than being limited to the boundaries of individual water companies.
The Environment Agency intends that the plans will:
Source: Environment Agency 2020
The IWC calls for a shift from reactive maintenance to proactive, long-term assessments of asset health, ensuring that future challenges like climate change are integrated into planning.
Instead of solely relying on industry-wide benchmarks. The IWC proposes integrating a “supervisory function” into regulation, which mirrors how US state commissions, like inNorth Carolina, combine oversight with local knowledge.
Wales’ RainScape initiative in Llanelli and Gowerton shows how green infrastructure can provide multiple benefits. It helps reduce stormwater flows, supports biodiversity, and creates more resilient communities. This is similar to nature-based solutions in the US, such as the Staten Island Bluebelt initiative.
The US examples, while not mentioned in the IWC report, provide several interesting references for fragmented water systems and planning functions. Active regulatory supervision in the US, particularly in states like North Carolina, provides a reference point for going beyond benchmarking to understand local challenges and ensure early intervention. It also provides an opportunity to look for the new problems that would be encountered.
Nature-based solutions stand out as another area of shared learning. While Wales’ RainScape project has demonstrated the benefits of green infrastructure in the UK, similar US initiatives show that these approaches can provide cost-effective and environmentally beneficial ways to address both flooding and drought risks. Finally, the US examples highlight the importance of regulatory clarity and clear long-term planning to attract investment and build trust with customers and communities – something the UK must continue to strengthen in order to support the ambitious changes outlined in the IWC report.
Building resilience in water systems is a challenge that transcends national boundaries. The experiences of the US and the UK demonstrate that there is no single path to follow. However, by drawing on each other’s lessons – especially around consolidation, proactive regulation, and nature-based solutions – we will all be better informed.
.png)
Explore our publication which highlights 10 hot topics, from climate change objectives to market risk premiums, providing expert insights on how regulators and businesses navigate these critical financial considerations.
2024
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur.
Block quote
Ordered list
Unordered list
Bold text
Emphasis
Superscript
Subscript
Explore how Dubai’s Hassyan SWRO megaproject could redefine low-energy, solar-powered desalination and what it means for water security and sustainable infrastructure.
2025
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur.
Block quote
Ordered list
Unordered list
Bold text
Emphasis
Superscript
Subscript
.png)
Discover MCC’s guide to ROI forecasting, how to build financial models that stand up to scrutiny, capture uncertainty, and support better investment decisions.
2025
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur.
Block quote
Ordered list
Unordered list
Bold text
Emphasis
Superscript
Subscript
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.
