AI in the water sector: Ofwat publishes its AI adoption plan for the water sector during transition to new regulators in England and Wales

Ofwat has published its Ofwat AI adoption plan for the water sector during transition, setting out its initial approach to AI adoption during the transition to new regulators in England and Wales. The plan is not a full regulatory framework. Instead, it is intended to establish practical foundations, provide clarity on expectations, and support responsible innovation while regulatory structures evolve. 

The publication is intended to provide clarity at a time when the industry is undergoing what will undoubtedly be its most significant regulatory reform in decades. The Government published the Water Sector Reform White Paper in January 2026, which sets out the Government’s reforms for the overhaul of the sector. As part of these changes, the Government is proposing to abolish Ofwat, and consolidate the water system functions from the other existing regulators into one new body. The Government is due to publish a transition plan this year, setting out how the regulatory reforms will be implemented. So, while the Ofwat AI plan is helpful in understanding the expected development of AI in the sector, the new regulator may take a different direction. Indeed Ofwat emphasise that the AI plan represents only their “best intentions” for this work before the new regulator is functioning.

The Ofwat AI adoption plan highlights that AI is already embedded in the sector and adoption should not be delayed until institutional reform is complete, given both the pace of technological change and its potential to improve outcomes. 

It sits as the first step of Ofwat’s AI Adoption Indicative Plan, as set out below:

Current Position of AI adoption in the Water Sector:

The plan sits against the backdrop of the following trends identified within the water sector:

• AI is already in active use across the sector: Water companies report live and embedded use of AI across operational activities, including network management, maintenance, customer services and regulatory reporting.
• Clear potential benefits—but dependent on data and governance: AI is expected to improve environmental outcomes, operational performance and customer outcomes, but effectiveness depends on data quality, monitoring, and robust operational governance.
• Existing regulatory obligations continue to apply: Companies remain responsible for AI outputs. The use of AI does not replace professional judgement, governance or accountability, and must comply with existing legal and regulatory requirements. 

Ofwat’s Five Priority Areas during the Transition

Ofwat intends to take forward its approach during the transition through five core workstreams:

1. Better Understanding of AI adoption in the Water Sector: Build a clearer understanding of how AI is currently used, including use cases, opportunities, barriers and risks across the sector through engagement with water companies, relevant stakeholders and academia.
2. Develop AI Guidance: Produce early, practical guidance focusing on principles, data readiness, and sector‑specific considerations, and drawing on existing frameworks, to ensure there is sufficient support for responsible adoption.
3. Enable More Innovation: Support innovation through mechanisms such as the Water Innovation Fund, and explore enablers including AI sandboxes as well as shared and synthetic datasets where appropriate.
4. Develop Monitoring and Reporting Approaches: Establish ways to track AI adoption and impact, including growth, sustainability and public value, while avoiding unnecessary regulatory burden.
5. Build Ofwat’s internal AI capabilities: Continue developing internal AI use (including tools such as Microsoft Copilot), alongside improved data platforms, governance frameworks and analytical capability through working closely with Ofwat’s internal AI Working Group.

Key Challenges to AI Adoption raised by the Water Sector

The plan identifies several constraints that will shape adoption:

• Data readiness and quality; highlighted by companies as the most significant barrier to effective AI deployment.
• Workforce impacts and skills development; including perceptions of AI adoption and capability gaps.
• Cyber security and governance; with a need for clear, trusted frameworks to support safe deployment in critical infrastructure. 

Cross‑Regulator Coordination

Moving forward, Ofwat emphasised a collaborative, cross‑regulator approach, working with bodies such as the Environment Agency, Drinking Water Inspectorate, Natural Resources Wales and Natural England during the transition. The aim is to reduce duplication, streamline engagement with companies, and establish a consistent foundation for the future regulators.

If you would like to discuss how current or future regulations impact what you do with AI, please contact Tom Whittaker, Brian Wong, Lucy Pegler, Martin Cook, Liz Griffiths or any other member in our Technology team.  For the latest on AI law and regulation, see our blog and newsletter.