IB 17/14 Protecting customers where there are very material differences between companies’ re-submitted plans and Ofwat’s wholesale cost assessment

Ofwat has today written to Bristol Water, Thames Water and United Utilities to inform them that it is already clear that, for individual price controls, very material differences remain between the companies’ re-submitted plans and our assessment of efficient wholesale costs.

These concerns are focused on the future planned expenditures on Bristol Water’s wholesale water price control, the proposed separate price control for Thames’s costs in respect of the Thames Tideway Tunnel, and United Utilities’ wholesale wastewater price control. For each of these price controls it is clear that there is still more than a 20% difference between the company’s plan and the level of costs we currently consider to be efficient based on a combination of our cost modelling and the evidence that companies have provided. These differences are materially different from those for all other companies for the purposes of draft determination and, where relevant, the companies’ other wholesale price controls.

For Thames the concerns relate to how contingencies and risk have been included in Thames’s part of the Tideway Tunnel work and how they are being managed within the new proposed price control framework.

The current ‘gaps’ for each company are as follows:

  • Bristol Water – Water: £203m (57%)
  • Thames Water – Thames Tideway Tunnel Costs: £331m (102%)
  • United Utilities – Wastewater: £760m (29%)

This early notification is intended to protect customers by allowing those companies with very material differences time to reconsider their plans in these areas or to provide further compelling evidence in responding to Ofwat’s draft determinations that the costs they are putting forward are efficient so Ofwat can take this into account in its final determinations in December. These companies may wish to re-engage their customer challenge groups and engage with other regulators.

Ofwat will issue draft determinations for all relevant water and wastewater companies (including these three) as planned on 29 August 2014. All relevant companies and our other stakeholders will have until 3 October 2014 to make any representations in relation to these draft determinations. Final determinations will be issued in December.

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Notes to editors

 

  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. This release may be of interest to those following these companies: Affinity Water, Anglian Water Services Ltd, Bristol Water 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, South East 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.
  3. Ofwat is intending to set separate price controls for wholesale water and wastewater, for household and non-household retail activities and, in the case of Thames Water, for the Thames Tideway Tunnel.
  4. Media enquiries to Ofwat Press Office on:
    Benedict Fisher 0121 644 7642 / [email protected]