Regulator Ofwat is encouraging companies to make more efficient decisions on water usage.
In its new report published yesterday, it proposes to incentivise companies to choose sustainable and low-carbon solutions and encourage water trading.
The regulator will also incentivise well-performing companies that outperform the controls they set out.
Ofwat sets out price limits for water companies every five years to protect customers from rising bills. It is now making decisions on the price limits for the 2015-2020 period, with a draft set of figures to be published this autumn.
The regulator is setting separate price controls for the retail and wholesale sectors, which it claims will drive companies to deliver a better and more sustainable service. It will also support the proposals in the Government’s draft Water Bill, which includes allowing greater choice for non-household customers and reforms in the supply sector.
Ofwat told ELN the main challenge would be to ensure the nation has enough water resources and that water is being used efficiently.