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 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.
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.
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.
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|
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.
|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|