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Price review 2004
The company monitoring plans for 2005-10 Background Ofwat's final determination in December 2004 set out the price limits and outputs for each company for the years 2005-06 to 2009-10. The purpose of the company monitoring plans for 2005-10 is for each company to set out its commitments to deliver the required levels of drinking water and environmental quality outputs and standards of service, consistent with the price limits set by us. It should enable everyone to see for each company the improvements that will be delivered within the price limits set. The company monitoring plans for 2005-10 build upon the public domain summary of the final business plan. The plan describes the company's strategy for 2005-10 and how it has evolved; its commitments on drinking water quality and environmental improvements; services to customers; maintaining serviceability to customers; and prices. Companies' performance Ofwat will monitor companies' compliance with the expectations set down in the final determination through the annual June return. The monitoring plans will support this process and enable others to put the annual information into a proper context. The information needed to assess companies' performance year-by-year throughout the price limit period is outlined below, under three headings:
Outputs The required minimum outputs are set down in some detail in final determinations. The quality outputs are consistent with Ministers' decisions. Ofwat, together with the quality regulators (the Environment Agency and the Drinking Water Inspectorate) will review companies' progress on these outputs, some of which will be related to maintaining current performance and others to phased improvements. Delivery of some supply/demand outputs will depend on the development of customer demands (e.g. optional metering, billed water delivered). Customer demands may not develop as expected, so that compliance with legal requirements will lead to variations in outputs without any regulatory concerns. In these cases, however, it may be appropriate for financial adjustments to be made in future to reflect the delivery of different outputs (see Setting water and sewerage price limits for 2005-10: Framework and approach). Outputs will generally be monitored annually through the June returns and reports from the quality regulators. Evidence of a likely failure to deliver required improvements could trigger additional reporting (eg quarterly reports) by companies, scrutinised by reporters. Where we have concerns, we could also require formal undertakings from companies. Failure to deliver the required minimum outputs will lead to regulatory action and prosecution or enforcement proceedings by the relevant regulator. All shortfalls (failures to deliver) will be recorded and quantified in cost terms. Prices We will also check each company's performance to ensure that charges are in accordance with Regulations issued under the Water Industry Act 1999; take due account of guidance given to Ofwat by Ministers on social and environmental matters; avoid undue preference or discrimination between groups of customers; and do not rise by more than the limits set. Price monitoring will focus on the annual principal statements and draft charges schemes, submitted each January. Serviceability to customers When we talk about "serviceability", we mean the continuing ability of the water and sewerage network to maintain a certain standard of service to customers and/or compliance with quality requirements. We will monitor serviceability to customers with a particular focus on the maintenance of the companies' networks of pipes and sewers for both current and future customers. Our focus will be on assessing trends in service performance, taking account of short-term variable factors. The company's monitoring plan should set out the company's strategies in this area. Preparing for the 2009 review Companies' costs and year-on-year out-performance will need to be recorded and understood, so that relevant factors can be reflected in judgements and decisions at the 2009 price review. We will especially want to measure annual out-performance, since any uncertainty in this area would be detrimental to incentives to companies to improve their performance. General guidance Companies submitted their monitoring plans at the beginning of March. On submission of the monitoring plan we checked the plan against the final determination. Where inconsistencies were identified, a company was given the opportunity to revise its plan before it was put in the public domain. Where we were unable to agree, we have appended a note (Annex 1) to the company's plan setting out our regulatory expectations. Each company has made its own arrangements to publish its plan and you should consult the company you are interested in. If you would like to read a fuller version of each plan, public versions can be examined in our Library (by appointment). You may also request a copy from the company.  |
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