25 years of Regulation of Water Services; looking backwards & forwards11This paper is an extension of the notes I delivered at the annual conference of the Regulatory policy Institute held at Merton College Oxford on 12/13 September 2016 I amended the notes in the light of the discussion at Oxford and further helpful comments on an earlier draft. An important contribution could be made by adoption, or adaptation, of a new procedure devised for the Australian electricity market, made in a lecture by John Pearce, Chair, Australian Energy Market Commission, and an insight by Stephen Smith in his presentation on the Evolution of Network Price Determination Processes. Further points emerged at a subsequent presentation by Thames Water at a European Policy Forum Roundtable on the financing of the Thames Tideway Tunnel. I am particularly grateful to Alan Sutherland, John Smith, Colin Skellett, John Banyard, Remy Prud'homme, Rupert Darwall, Martin Cave, Stephen Littlechild, Sonia Brown and Jonson Cox and to three anonymous referees for help in the drafting of this paper and to Julia Havard in editing the text.,22See my article on the Regulation of Water Services in the UK in Utilities Policy 24 (2013) for my account of my term of office from 1989 to 2000

Sir Ian Byatt was the first regulator of the water and wastewater industry in England and Wales (Director General of Water Service) from privatisation in 1989–2000. He examines the experience of a quarter of a century of the regulation of water companies, concentrating on what worked well and where further developments are needed to deal with changing circumstances. He concludes that while RPI-X regulation, combined with comparative competition, worked well with respect to operating expenditure, the regulation of capital expenditure needs enhancement to avoid overcharging of customers. He advocates the development of performance regulation, backed by project competition, where customers pay for quality enhancement only when they receive it.