Ofwat has kickstarted its approach to the recent appeals by four UK water companies to the Competition and Markets Authority (CMA) against its PR19 Final Determination (FD) decisions on their individual AMP7 business plans with a robust defence of the Price Review process, the work of the regulator and how it arrived at its FD decisions.
Ofwat has kickstarted its approach to the recent appeals by four UK water companies to the Competition and Markets Authority (CMA) against its PR19 Final Determination decisions on their individual AMP7 business plans with a robust defence of the Price Review process, the work of the regulator and how it arrived at its FD decisions.
Ofwat has published an extensive range of reference documents which make up its submission to the CMA setting out its position.
The documents are accompanied by an overview by the water sector regulator making its case for the decisions it has reached. The overview is intended to provide the CMA with Ofwat’s view on the most important issues Ofwat envisages will arise during the appeals process.
Introducing its position, Ofwat said that the 2019 Price Review had come at a critical time for the water sector in England and Wales in the face of profound challenges from population growth and population growth, commenting:
“At the same time, the sector needs to address ongoing concerns about sustained operational performance failures and weaknesses in corporate behaviours.”
Ofwat said it had been “transparent, thorough and…listened” in conducting the Price Review and that while thirteen companies had accepted the challenge, four had not.
“Despite our detailed analysis of operational best practice and historic performance, our scrutiny of business plans and evidence of returns in capital markets, it seems four companies believe customers should pay more and receive less.” the overview says.
Ofwat’s Final Determination allowed the appellant companies the following investment spend between 2020-25:
- Anglian Water - £5.6 billion
- Bristol Water - £462 million
- Northumbrian Water - £2.9 billion
- Yorkshire Water - £4.4 billion
The overview provides a broad analysis of the water sector in England and Wales as a whole, flagging up Ofwat's view that water company performance has stagnated in recent years with “some notable failures in service delivery….Performance on leakage has stagnated for considerably longer.”
The overview says that Ofwat considers that each of the disputing companies “has more to do to meet our expectations.”
The key issues for each company are summarized as follows:
Yorkshire Water “We are engaged in ongoing discussions with Yorkshire Water regarding its financial resilience and its intercompany loan arrangements.”
Northumbrian Water “Our determinations identified Northumbrian Water as a company that was slow to adopt changes aimed at improving trust and confidence in the water secretor: we assessed the company to be falling well short on demonstrating how its future dividend polcy will take account of its performance.”
Bristol Water “We expect to engage further with Bristol Water regarding its long term financial resilience.”
Anglian Water “Anglian Water is a company that it highly geared and expects to remain highly geared through 2020-25.”
The CMA has been granted a six month extension for the appeals process because of coronavirus - the deadline has been extended to 19th March 2021.
Click here to download the overview in full
Click here to access the Ofwat submission documents for the CMA PR19 referrals
Sign In
