Anglian Water’s customers want to see investment made now to protect the environment, so its board and management voted unanimously to appeal Ofwat’s final determination.
Alex Plant, the regulation director at Anglian, told Utility Week there is commonality between Anglian’s and other companies’ appeals that ask if the balance is right between bill reduction and investment in resilience.
The company, which scored A+ for its customer engagement, spoke to half a million customers when writing its 2020 – 25 business plan.
“Our customers were really clear that if it’s a trade-off between lower bills and resilience, they choose resilience – even if it means bills go up.”
The proposed plan by Anglian included a 1 per cent bill cut but Ofwat’s stance was for a greater reduction.
Plant said the decision to seek a referral was not taken lightly: “We really put time and effort in on the customer side, so we really felt duty-bound to honour what our customers want us to do.”
He said public perception of the climate emergency had shifted even since the beginning of the PR19 process, and the plans by Anglian strove to mitigate the dangers of climate change with the urgency customers expected.
The company believes its proposed investment is appropriate to the scale of the challenges being faced and that accepting the determination would force the company into “sub-optimum reduced circumstances for five years”.
“The nature of the region means growth and climate change issues are immediate for us more than in some other parts of the country. We reacted and responded to that and tried to make step changes in the water resources and environment plan.”
He argued that investing long term did not equate to inefficiency, but it was preferable to pay for resilience now rather than in the future.
“We are doing a lot more and are having to fund it. The balance of that is upward pressure on bills, which was seen by Ofwat as inefficiency.”
Anglian had the largest gap between its proposed investment of £6.5 billion and Ofwat’s final determination of £5.7 billion. The totex gap of £747.8 million means bills would come down by 10 per cent compared to Anglian’s proposed 1 per cent bill reduction.
Chief executive Peter Simpson said the final determination did not allow the company to fulfil its resilience goals and requested the CMA referral “to consider if the right balance has been struck between bill reductions and investment”.
Plant said the company was pleased to be able to use the appeal system as part of the regulatory process.
Ofwat will now make referrals to the CMA on behalf of Anglian, Northumbrian, Yorkshire and Bristol, which will trigger the appeal process. Companies will implement the first year of the 2020 – 25 plan as set out in the final determination regardless of their ongoing appeal.