IB05/15 Ofwat publishes consultation on the PR14 reconciliation rulebook

Ofwat has today published a consultation on the reconciliation rulebook as part of the PR14 price review process, which concluded in December 2014. The PR14 price review set revenues and outputs for the regulated water and wastewaster companies in England and Wales for the period 2015-20 allowing £44 billion to be invested in improving services.

The draft rulebook sets out how Ofwat proposes to reconcile incentives set as part of PR14 and company performance at the next review in 2019. The draft rulebook also sets out the reconciliation approach to those factors not reconciled from the 2009 price review.

The draft rulebook includes how Ofwat proposes to manage:

  • Outcome delivery incentives (ODIs), which provide companies with rewards for achieving stretching performance targets and compensate customers if performance is below performance targets.
  • Wholesale total expenditure (totex) sharing, where company over- and underperformance is shared with customers.
  • Wholesale revenue forecasting incentive mechanism (WRFIM), which provides financial incentives for companies to provide accurate forecasts, and ensures under- and over-recovery is reconciled.
  • PR09 reconciliation (capital incentive scheme, blind year adjustments).
  • Household retail, where the total revenue allowance is adjusted for actual customer numbers.

At the conclusion of the price review Ofwat committed to publishing a rulebook as it acknowledged that PR14 represented a significant evolution of the historical approach to setting price controls. The draft rulebook provides investors and companies with the clarity to help facilitate investment in the long term interest of customers.

More information is available on the Ofwat website at www.ofwat.gov.uk.

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Notes to Editors

 

  1. Ofwat (The Water Services Regulation Authority) is the economic regulator of the water and wastewater sector 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 wastewater 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 Water Ltd, Wessex Water Services Ltd, and Yorkshire Water Services Ltd.
  3. Further information on the consultation can be found on the Ofwat website – www.ofwat.gov.uk.
  4. Media enquiries to Ofwat Press Office: Simon Markall on 0121 644 7696
  5. Analyst enquiries to David Black on 0121 644 7829.