Ofwat consults on WaSCs' bioresources assets value approach
A consultation on the approach for water and sewerage companies (WaSCs) to value their bioresources assets has been launched by Ofwat.
The consultation, which closes on March 31, 2017, will inform how the regulator allocates the legacy wastewater Regulatory Capital Value (RCV) at March 31, 2020 between the network plus and bioresources controls at PR19 and the information that is required from companies in September 2017.
In order to provide a level playing field for bioresources trading and processing and to protect customer interests, Ofwat said it is important that a robust and accurate valuation of sludge assets supports the proposed RCV allocation to bioresources. The proposed guidance in the consultation document sets out its view of the appropriate approach to asset valuation.
Ofwat currently has a single value for wastewater RCV that is the capital value of its wastewater assets, including bioresources assets, for regulatory purposes. It captures the capital invested in the business and forms part of our building block approach to price controls.
To allocate part of the wastewater RCV to the new bioresources price control, Ofwat will take a focused approach, where the allocation is based on the value of the assets used. A focused allocation means the RCV allocation is not driven by the historic discount to the RCV at privatisation (i.e. the difference between the value of the RCV and the value of the assets).
This is important as to the extent that the economic value of assets is over and above the RCV, it is rightly attributable to customers and their interests need to be protected. The remainder of the RCV after deducting the economic value of the sludge assets will be allocated to the wastewater network plus control.
Alongside this consultation, Ofwat has published a report that it had commissioned from Reckon LLP (with Jacobs) that it intends will be used by companies as they consider their valuation of sludge assets to inform their proposed RCV allocation. The report provides supporting guidance on the topics considered in the consultation.
- Qatar Olympic Committee joins British Water visit The Olympic Committee in Qatar is just one of the participants in a packed schedule for British Water's return trip to the... Read More >
- UK may ban plastic microbeads, says Stewart The UK government is considering a ban on the use of plastic microbeads in cosmetics because of their effect on aquatic... Read More >
- Government to open up water supply competition to households in England Households in England could be given a choice of water supplier by 2020, the government has announced. Read More >
- Comment: What could retail competition do for customers? Domestic retail competition could provide an opportunity to look again at how we determine the price of water to the... Read More >
- Comment: Sludge all set for reform The opening of the bioresources market presents water companies with an opportunity to do things differently, but what... Read More >
- Interview: Ben Jeffs, Chief Executive, MOSL “The whole industry has really mobilised around market opening, and the water companies deserve credit for that.” Read More >
- Close-Up: Who will be the big fish in the new water retail market? With a £2.5BN new market for non-domestic water retail to open in England in April, joint ventures, incumbents and new... Read More >
- Water Industry Procurement: could Brexit provide a fresh start? Could Brexit lead to a re-examination of the procurement rules which govern the water industry and other infrastructure... Read More >