Ofwat to test water company business plans
Ofwat has begun to scrutinise water companies' business plans for the next price review period (2020-2025), with the regulator due to publish its initial determination for each company's plan in January.
As part of the 2019 price review – which sets the price, service and incentive package that the water companies must deliver between 2020 and 2025 – each water company across England and Wales has set out a business plan detailing what it intends to deliver and what it proposes to charge customers in the years ahead.
Companies’ plans also outline how they will ensure the long-term resilience of their infrastructure and operations and what additional help they will provide to the most vulnerable customers.
Business plan proposals outlined by the 17 water and wastewater companies include:
- Bill changes between 2020 and 2025 ranging from an increase of 3.5 per cent to a decrease of 14 per cent
- A reduction in daily household water use per person to as low as 119 litres, compared to a current sector-wide average of 141 litres
- A commitment from 16 companies to meet Ofwat’s 15 per cent leakage reduction challenge, with two companies promising to cut leakage by more than 20 per cent
When it publishes its initial assessment of each company’s plan on 31 January 2019, Ofwat will categorise companies’ plans according to the level of quality, ambition and innovation they have demonstrated.
The best plans could benefit from incentives through the price review process, while those that fall short will face closer scrutiny and interventions and could receive lower returns.
Ofwat will make final decisions on the services water companies must deliver and limits on the prices they can charge customers in December 2019.
Ofwat senior director David Black said: “Now that water companies’ business plans have been submitted, we’ve entered the next critical phase of our price review process.
"Over the coming months, we’ll be scrutinising each and every plan in detail to ensure they are robust enough to deliver a high quality, affordable and resilient service to customers in the years 2020-2025 and beyond.
"As we test each company’s plan, we’ll be looking for evidence of ambition and innovation and, crucially, we’ll want to see customers and the environment put to the fore as never before.”
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