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Regulator views sought by Ofwat on water companies

Ofwat is seeking the views of other regulators to establish if there are any outstanding material issues that have arisen since water company business plans were submitted in early December 2013, and which affect companies' compliance with statutory obligations.

Sonia Brown says views on risk and reward are not in alignment with market evidenceSonia Brown says views on risk and reward are not in alignment with market evidence

In a letter to the regulators, Ofwat chief regulation officer Sonia Brown said initial analysis of the business plans has highlighted several areas where the water regulator requires further information. Also, companies' views on risk and reward are not in alignment with market evidence for the water sector.

Brown said: "For these reasons we are going to extend our query process and remove default tariffs from the risk based review." She added that Ofwat will introduce a change to its process to:

  • On January 27, Ofwat will publish guidance on risk and reward
  • It proposes to pre-qualify companies for enhanced status if their business plans pass our tests for outcomes, costs and affordability and demonstrate robust board assurance. The pre-qualification results and reward for enhancement will be published on March 10
  • At this point, the boards of pre-qualifying companies will be invited to accept Ofwat's published guidance on the risk and reward. Those that do will gain enhanced status, while those that do not will be classified as standard

The remaining companies will receive the outcome of the risk based review on April 4.

Author: Maureen Gaines, Editor, WET News Find on Google+
Topic: Policy & Regulation
Tags: regulation , ofwat , price review , capital investment

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