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Industry News
Asset management has always been fundamental to the safe and reliable operation of water infrastructure. Now, Ofwat is strengthening the regulatory expectations around how water companies demonstrate that they understand, manage and make decisions about their assets.
Following consultation with the sector, the regulator is introducing a new asset management competence licence condition for water companies in England and Wales. The change is intended to improve confidence that companies have fit-for-purpose asset management systems in place and are making informed decisions throughout the lifecycle of their infrastructure.
For an industry managing ageing assets alongside increasing environmental, financial and operational pressures, the change places greater emphasis on something that extends well beyond maintaining an accurate asset register: being able to demonstrate a mature and effective approach to asset management.
What is changing?
Ofwat expects water companies to understand the condition, criticality and performance of their assets, as well as the risks those assets present to services and the environment.
Companies are also expected to develop well-justified plans for maintaining and enhancing their infrastructure and to consider outcomes over both the short and long term, including the potential effects of climate change.
The new licence condition is intended to establish a clearer regulatory basis for those expectations.
Ofwat initially considered requiring all water companies to achieve ISO 55001:2024 certification. Following feedback from the sector, it adopted a more flexible approach.
ISO 55001 will remain an accepted way for a company to demonstrate that its asset management system is competent, but it will not be the only route. Companies choosing an alternative approach will need to demonstrate competence through an appropriately qualified independent third-party assessment and can expect greater regulatory scrutiny.
A two-year transition period is planned to give companies that cannot yet demonstrate the required level of competence time to embed more mature practices.
Why asset management competence matters
The significance of the change is not simply the introduction of another regulatory requirement.
Water companies operate extensive networks of assets with different ages, conditions, levels of criticality and associated risks. Decisions about when to maintain, repair, replace or enhance those assets can affect service reliability, environmental performance, investment requirements and customer outcomes for many years.
Effective asset management therefore relies on more than knowing what assets an organisation owns.
It requires a clear understanding of how those assets are performing, the risks associated with failure, how their condition is changing and where investment will deliver the greatest long-term value.
This is particularly important when organisations are balancing immediate operational priorities against longer-term investment decisions. Reactive maintenance may address today’s problem, but mature asset management also asks why the problem occurred, whether similar assets are at risk and what action could prevent future failures.
Ofwat’s approach reflects this broader view of asset management, linking strategic planning with the practical management of infrastructure throughout its lifecycle.
Evidence becomes increasingly important
A recurring theme within Ofwat’s proposals is the need for companies to be able to demonstrate the competence of their asset management systems.
That makes the quality and consistency of asset information particularly important.
Understanding asset condition and performance depends on information being captured, maintained and accessible to the people making decisions. The same applies to records of inspections, maintenance activity, failures, interventions and changes made to assets over time.
No individual dataset provides the complete picture. Instead, organisations need to be able to connect information from across asset management, operational and planning activities to understand both current performance and longer-term risk.
The challenge is not simply collecting more data. It is ensuring that information is sufficiently reliable, current and meaningful to support decisions and provide evidence of how those decisions were reached.
That distinction becomes increasingly important when asset management maturity is subject to independent assessment and regulatory scrutiny.
From strategy to activity in the field
One of the challenges of mature asset management is maintaining the connection between strategic objectives and day-to-day operational activity.
An organisation may have comprehensive asset management policies and long-term investment plans, but their effectiveness ultimately depends on what happens to physical assets.
Inspections need to take place. Maintenance needs to be recorded. Changes in condition need to be captured. Work needs to be prioritised according to risk, and information gathered in the field needs to find its way back into future planning and decision-making.
This creates a continuous cycle: asset information informs decisions; those decisions lead to interventions; and the results of those interventions create new information about the asset.
Maintaining that connection can help organisations understand not only what work has been completed, but whether it delivered the expected outcome.
Asset management as part of wider resilience
The new licence condition also sits within a wider Ofwat programme focused on operational resilience and asset health.
Alongside the licence condition, Ofwat is carrying out its 2026 Asset Management Maturity Assessment (AMMA), which is intended to provide a clearer picture of asset management capability across the sector and identify both areas for improvement and examples of leading practice.
The licence condition and AMMA perform different roles. The licence establishes expectations that companies will be required to meet, while the maturity assessment is intended to support sector learning and help companies understand where further development may be needed.
Early insights from the 2026 assessment are expected in 2027.
Together, these measures indicate a growing regulatory focus not simply on levels of investment, but on the quality of the information, processes and decision-making that determine how investment is directed.
What happens next?
The move towards a formal asset management competence requirement gives water companies a clear reason to assess the maturity of their current approach.
For some, that may mean preparing for ISO 55001 certification. For others, it may involve demonstrating competence through an alternative independently assessed framework.
Either way, the underlying questions are likely to be similar.
Do we understand our assets and their condition? Do we understand the risks associated with them? Can we explain why maintenance and investment decisions have been made? Can we connect strategic objectives with operational activity? And do we have the evidence to demonstrate that our approach is working?
Those questions go to the heart of effective asset management regardless of regulatory requirements.
Ofwat’s new licence condition brings them firmly into regulatory focus — and reinforces the importance of treating asset management as an organisation-wide discipline rather than simply a record of the assets an organisation owns.
Further reading: Ofwat’s New Licence Condition for asset management competence, statutory consultation on proposed licence modifications, and Asset Management Maturity Assessment (AMMA) guidance.
