Our reconciliation rulebook sets out our approach to the reconciliations that will be required at the end of the 2015-20 price control to take account of past performance and the various price control incentive mechanisms. We consider that setting out our approach now will provide greater clarity to customers, companies and wider stakeholders, and is consistent with building trust and confidence in the water sector.
The mechanisms that the rulebook covers could have a material impact on company revenues, the RCV and the delivery of customer outcomes from the £44 billion of expenditure in the price control.
The PR14 reconciliation rulebook describes the way that we will reconcile companies’ 2015-2020 performance against the PR14 final determinations at PR19, through the following mechanisms.
- 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 (blind year adjustments).
- Household retail, where the total revenue allowance is adjusted for actual customer numbers.
For each mechanism the rulebook sets out the treatment of inflation and whether companies and customers should be compensated for the time value of money and taxation.
- The PR14 reconciliation rulebook policy document This document follows our March 2015 consultation on these matters and explains how we have responded to the points raised by consultees. It also invites views on how to ensure that the WRFIM formula and companies’ licences are consistent.
Reconciliation rulebook and spreadsheets
- Ofwat PR14 reconciliation rulebook
- Outcome delivery incentives (ODIs)
- Wholesale total expenditure (totex) sharing
- Wholesale revenue forecasting incentive mechanism (WRFIM)
- PR09 reconciliation
- Household retail
- Water trading