After we last set price limits in November 2009, we started a wide-ranging and in-depth review of our regulation to see if it was fit for purpose in the face of the challenges facing the water and sewerage sectors in England and Wales. This work has included reviewing the way in which we set price limits for the sectors, through our future price limits project.
In November 2011, we consulted on proposals for the high-level principles we will use to guide the continued development of price setting – our key regulatory tool – in ‘Future price limits – a consultation on the framework’. We also published a draft impact assessment to accompany this consultation.
Shaped by the feedback we received, ‘Future price limits – a statement of principles’ sets out the high-level principles that we intend to use to guide us in how we set price limits in the future. It highlights those elements of the framework that we are likely to apply at the next price review (including those that we are retaining because they work well) – as well as those areas where we need to do additional work to decide whether we need to take a more phased approach to development and implementation.
We received extensive feedback from stakeholders throughout the future price limits project. We have published the formal responses we received to our consultation, and summarised and described how we are addressing them in our ‘Summary of responses to the consultation’.
We have updated our impact assessment based on this document, and taking into account both the comments we have received, and the proposals in the UK Government’s Water White Paper.
Many of the comments we received relate to very valid and important questions of how the detail of the framework will operate. ‘From principles to price setting – next steps’ sets out the work we intend to do between now and the autumn to address these useful comments.