Ofwat's main statutory duties include protecting the interests of consumers, securing the long-term resilience of water supply and wastewater systems, and ensuring that companies carry out their functions and are able to finance them.

[3] Ofwat primarily sets limits on the prices charged for water and sewerage services, taking into account proposed capital investment schemes (such as building new wastewater treatment works) and expected operational efficiency gains.

Ofwat was set up in 1988, at the same time as 10 water authorities in England and Wales were privatised by flotation on the stock market.

The staff who supported the role of the Director General were collectively known as the "Office of Water Services", which was abbreviated to "Ofwat".

[12] Ofwat sets a so-called "K factor" in companies' licences which determine the average value of price rises above the rate of inflation (RPI) for the next five year asset management plan period.