Early draft determination models

We use data models to calculate water companies’ price controls – and certain information we need to set those controls.

Below we’ve set out the models we have used to set the early draft determinations for Severn Trent Water, South West Water and United Utilities Water for 2020-25. We will publish the models for other companies when we publish their draft determinations in July 2019.

We have also published models (‘PR19 reconciliation models’) we will use when we next set price controls in 2024 for how we will take reconcile companies’ performance during 2020-25.

We have also published a number of other models – including those for other companies – when we made our initial assessment of companies’ business plans in January 2019.

Past delivery models

The purpose of the past delivery modelling suite is to perform the reconciliations of the 2014 price review incentive mechanisms operating for companies during 2015-20.

We will apply the reconciliation adjustments to companies’ 2020-25 price controls. We use the revenue and Regulatory Capital Value (RCV) adjustments produced by the reconciliation models as inputs for the PR19 financial model in the revenue adjustments feeder model and the RCV adjustments feeder model.

For each company we publish:

a model for each reconciliation
a revenue adjustments feeder model
a RCV adjustments feeder model.

Company	Outcome delivery incentives	Land disposals	Wholesale Revenue Forecasting Incentive Mechanism	Total Expenditure reconciliation	Residential retail revenue	Regulatory capital value adjustment model	Revenue adjustments model	Aggregation model
Severn Trent Water	Outcome Delivery Incentives model – Severn Trent Water	Land Disposals model – Severn Trent Water	Wholesale Revenue Forecasting Incentive Mechanism model – Severn Trent Water	Total Expenditure reconciliation model – Severn Trent Water	Residential Retail Revenue model – Severn Trent Water	Regulatory capital value adjustment model – Severn Trent Water	Revenue adjustments model – Severn Trent Water	n/a
South West Water	Outcome Delivery Incentives model – South West Water Outcome Delivery Incentives model – Bournemouth Water	Land Disposals model – South West Water Land Disposals model – Bournemouth Water	Wholesale Revenue Forecasting Incentive Mechanism model – South West Water Wholesale Revenue Forecasting Incentive Mechanism model – Bournemouth Water	Total Expenditure reconciliation model – South West Water Total Expenditure reconciliation model – Bournemouth Water	Residential Retail Revenue model – South West Water Residential Retail Revenue model – Bournemouth Water	Regulatory capital value adjustment model – South West Water Regulatory capital value adjustment model – Bournemouth Water	Revenue adjustments model – South West Water Revenue adjustments model – Bournemouth Water	South West & Bournemouth aggregation model – South West Water
United Utilities Water	Outcome Delivery Incentives model – United Utilities Water	Land Disposals model – United Utilities Water	Wholesale Revenue Forecasting Incentive Mechanism model – United Utilities Water	Total Expenditure reconciliation model – United Utilities Water	Residential Retail Revenue model – United Utilities Water	Regulatory capital value adjustment model – United Utilities Water	Revenue adjustments model – United Utilities Water	n/a

Updated cost assessment models

The aim of cost assessment modelling suite is to assess business plan costs and calculate an efficient total expenditure (totex) allowance for companies.

We published our full suite of models when we made our initial assessment of companies’ business plans in January 2019. Below are the models we have updated for the draft determinations of Severn Trent Water, South West Water and United Utilities Water.

Financial models

The purpose of the financial modelling suite is to set price control limits for the 2019 price review and to test company financeability. It is also used to test return on Regulated Equity in different scenarios.

The suite consists of:

the main financial model
a grants and contributions model that calculates the grants and contributions for input to the financial model.

We publish a financial model and grants and contributions model for each company.

Company	Financial model	Grants and contributions model
Severn Trent Water	Financial model – Severn Trent Water	Grants and Contributions model – Severn Trent Water
South West Water	Financial model – South West Water	Grants and Contributions model – South West Water
United Utilities Water	Financial model – United Utilities Water	Grants and Contributions model – United Utilities Water

Bioresources models

We use the following spreadsheet models to calculate the bioresources revenue to remunerate fixed costs for companies.

The aim of those models is to illustrate the methodology we have used to classify companies’ revenues as either fixed or variable. The methodology ensures that where sludge production varies the incremental change in revenues that arises is aligned to incremental costs.

Getting the alignment between incremental revenues and incremental costs right is key to ensuring that the company is correctly remunerated, if there is a difference between the sludge companies actually produce and what they had forecast.

Company	Bioresources models
Severn Trent Water	Bioresources revenue to remunerate fixed costs – Severn Trent Water
South West Water	Bioresources revenue to remunerate fixed costs – South West Water
United Utilities Water	Bioresources revenue to remunerate fixed costs – United Utilities Water

PR19 reconciliation models

We have published models (‘PR19 reconciliation models’) we will use when we next set price controls in 2024 for how we will take reconcile companies’ performance during 2020-25.

PR19 price setting models map - fast track draft determinations

PR19 reconciliation models

Initial assessment of business plans – past delivery models

Initial assessment of business plans – cost assessment models

Initial assessment of business plans – updated models and data tables

Early draft determination models

Past delivery models

Company

Outcome delivery incentives

Land disposals

Wholesale Revenue Forecasting Incentive Mechanism

Total Expenditure reconciliation

Residential retail revenue

Regulatory capital value adjustment model

Revenue adjustments model

Aggregation model

Updated cost assessment models

Wholesale water

Wholesale wastewater

Retail

Financial models

Company

Financial model

Grants and contributions model

Bioresources models

Company

Bioresources models

PR19 reconciliation models