Setting price controls for 2015-20 – information about South West Water's bad debt adjustments

As part of our pre-qualification decision on South West Water we asked them to complete a small number of actions. One of these was to provide sufficient evidence to support its calculation of the size of its bad debt average cost to serve (ACTS) adjustment.

South West Water asked Oxera to undertake analysis in support of its proposed adjustment on doubtful debt. South West Water particularly asked Oxera to look at the appropriate adjustment that reflects the impact of changes in deprivation and bill levels over 2015-20.

As part of our assessment of South West Water’s business plan, we asked PwC to review the econometric analysis undertaken on behalf of South West Water by Oxera. We particularly asked them to review the econometric modelling approaches undertaken, and to consider different options for forecasting how South West’s bad debt costs may evolve in 2015-20.