IB 02/14: Ofwat publishes guidance on risk and reward


Ofwat has today published guidance on risk and reward for water and sewerage companies as part of its 2014 price review process. The guidance is available to view on www.ofwat.gov.uk. A direct link is provided at the end of this announcement.

In December, water companies submitted their plans for the period 2015 – 2020. Ofwat will ‘pre-qualify’ companies in March that have outstanding business plans which pass its tests for outcomes, costs and affordability, and which have demonstrated robust Board assurance. Those companies that ‘pre-qualify’ will need to consider whether to adopt Ofwat’s risk and reward guidance. Any ‘pre-qualified’ companies that choose to adopt Ofwat’s risk and reward guidance will then benefit from a fast-track approval process.

In April, Ofwat’s Board will announce its decision on the quality of all other companies’ plans. Business plans requiring some intervention, will go through a standard process, while any company whose plan has significant shortcomings will be asked to resubmit its plans.

Cathryn Ross, Ofwat’s Chief Executive said:

“Our role is to protect customers and ensure that efficient companies are able to   finance their functions.

“We have already seen companies responding to our calls to listen to their customers. The guidance that we issued today offers a further opportunity for companies to secure the best possible outcome for their customers.”

Sonia Brown, Ofwat’s Chief Regulation Officer said:

“It is important for companies and customers that risks and rewards are appropriately shared between them. This helps companies keep customers’ bills    as low as possible and deliver the services that customers need both today and            tomorrow.”

“It will be important for boards of water companies to consider this guidance carefully.”

Ofwat is due to make final decision on prices by January 2015.

The guidance can be viewed on: https://www.ofwat.gov.uk/pricereview/pr14/gud_tec20140127riskreward.pdf


  1. The Water Services Regulation Authority (Ofwat) is the economic regulator of water and sewerage companies in England and Wales. It exercises its powers in a way that it judges will protect the interests of consumers, promote value and safeguard future water and sewerage services by allowing efficient companies to carry out their functions properly, and finance them.
  2. Further details of about the price review, and some of the benefits for a company if its business plan is fast tracked, are outlined in this information bulletin.
  3. Further details on significant milestones in the price review process can be seen in this diagram
  4. Water companies submitted its business plans on 2 December 2013. The above release may be of interest to those following these companies: Affinity Water, Anglian Water Services Ltd, Bristol Water plc, Cambridge Water Company plc, Cholderton and District Water Company Ltd, Dee Valley Water plc, Dŵr Cymru Cyfyngedig (Welsh Water), Northumbrian Water Ltd, Portsmouth Water plc, Sembcorp Bournemouth Water Ltd, Severn Trent Water Ltd, Southern Water Services Ltd, South Staffordshire Water plc, South West Water Ltd, Sutton & East Surrey Water plc, Thames Water Utilities Ltd, United Utilities Ltd,  Wessex Water Services Ltd, and Yorkshire Water Services Ltd.
  5. Media enquiries to Ofwat Press Office on:
    Benedict Fisher 0121 644 7642 / mailto:[email protected]
    Harbinder Babra 0121 644 7616 / [email protected]