PN 07/21: Ofwat comment on CMA determinations

We are yet to review the detail of the CMA’s determinations, but it is clear the CMA has listened to representations from Ofwat and consumer groups.  It has significantly reduced the returns allowed for investors, compared to its proposals last year.

This package from the CMA will help drive Anglian Water, Bristol Water, Northumbrian Water and Yorkshire Water to improve their efficiency and deliver better outcomes.

Sizeable investment is required in the water industry over coming years and it is vital the sector remains attractive to investors across the globe. But to maintain public trust, it is also important that investor returns are properly earned and reflect what companies deliver for customers and the environment.

With the CMA review complete, companies and Ofwat must focus their efforts on building a water sector fit for the future – one that is more resilient, environmentally sustainable and that provides customers with the service they deserve at a price they can afford.

Rachel Fletcher, Chief Executive of Ofwat, said:

“We are challenging all water companies to transform their performance and deliver more for customers and the environment. In 2019 we backed a huge £50 billion five-year spending package for companies to do just that.

“Most companies accepted the challenge and, over the last year, we have seen tangible improvements, including on priorities like reducing leakage. However, four companies appealed to the CMA to intervene.

“I am grateful to the CMA for its engagement with us and the considerable analysis it has conducted.  Overall, the CMA has supported the ambition we have for the industry. Its decisions require the four companies to make a step change in productivity and performance.

“Crucially, the CMA has backed the principle we have been advocating, that investors must work hard for their returns, bringing customers better, more resilient services and a healthier environment for generations to come.

“In the coming years much work is needed to deliver net zero, improve the natural world, provide resilient water services in the face of climate change, and keep up with customers’ changing expectations. Ofwat will continue to hold companies to account for delivering against these goals, while enabling them to innovate and attract the investment they need.”

ENDS

Notes to editors:

  1. Following a detailed 12 month review, the CMA has issued its final decision in the appeal lodged by 4 water companies against Ofwat’s decisions on the money they can charge customers and the service standards they need to deliver in the period to 2025.
  2. Our final determination gave Anglian Water £5.6bn over the next five years to improve services to customers and the environment, 17% more than it has spent historically. Anglian Water customers would see bills fall by 10%, they would see investment of £305 million to help move water from other areas in the region, they would see pollution incidents fall by a third, and carbon emissions down by 10%
  3. Our final determination gave Bristol Water with £462 million over the next five years. Their customers would see bills fall by 15%, they would see over £8 million invested to improve water mains resilience, they would see 48,000 water meters installed, and they would see plans for 85% of vulnerable customers to be left satisfied with the help they receive.
  4. Our final determination gave Northumbrian Water with £2.9bn over the next five years, 5% more than it has spent historically. Their customers would see bills fall by 26%, they would see greenhouse gas emissions fall by 28%, they would see an increase in bathing spots rated good or excellent, and they would see more than 450,000 smart meters be installed.
  5. Our final determination gave Yorkshire Water £4.4bn over the next five years, 10% more than it has spent historically. Their customers would see bills fall by 9%, they would see almost a third more land enhanced in the region, they would see 50% more customers on social tariffs and WaterSure, and they would see pollution incidents fall by 41%.