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Reports commissioned by Ofwat
Leakage methodology review In July 2006 we launched a review of our approach to setting leakage targets (see RD 11/06). Taking into account views from a wide range of stakeholders, we commissioned three specific pieces of work. These projects are now sufficiently complete for us to publish the key reports and to set out the next steps that we will take. We have provided links to the reports below, together with a summary of their original purpose and what we will do next for each. Alternative approaches to leakage target setting Purpose: To review and compare alternatives to the Economic Level of Leakage (ELL) as a means for setting leakage targets. Next steps: The report has recommended that a 'frontier approach' to target setting be analysed as a workable alternative to the ELL. We, along with the Environment Agency, will complete a further piece of work by spring 2008 that will set out precisely how a frontier approach would work in practice and examine the costs and benefits of adopting such an approach. The final report from this strand of work will be published here. If we conclude a change of approach is required we will launch a full public consultation. We aim to publish conclusions following the consultation in time for companies to follow the new approach in their final Business Plans and Water Resource Management Plans, subject to any practical constraints.
Variation in per capita consumption (PCC) estimates Purpose: To consider whether the current variation in PCC across companies is to be expected and to make recommendations for improvements to companies' methodologies. Next steps: The report concludes that national variation in PCC can be explained by differences in the underlying drivers of PCC. The report makes recommendations for companies to improve their own methods of calculating PCC and we will monitor companies' progress in meeting these recommendations through the June returns.
Providing best practice guidance on the inclusion of externalities in the ELL calculation Purpose: To provide practical guidance to companies on the inclusion of environmental and social costs and benefits in the ELL calculation. Next steps: Our consultants have produced two documents. A report that explores the issues and summarises the guidance to companies. And a guidance document that can be used directly by the companies. These documents are in draft form at present while a small number of companies test the guidance document for usability and to assess the potential impact that the guidance will have on the ELL. We will publish the final documents in the New Year and expect all companies to follow the guidance in their Business Plans for PR09.
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