In the document sent to the CMA, the water company criticises the modelling system used by the regulator for not being “sufficiently persuasive or well-evidenced” enough to overrule its business plan.
This follows Bristol Water’s regulatory director Mike King’s comments to Utility Week in February that Ofwat has used “flawed modelling” to arrive at the final determination.
The water company was responding to comments made to the CMA by Ofwat, which was in turn responding to Bristol Water’s statement of case to the competition authority.
Bristol Water added: “Given the size of the gap between our modelled cost threshold, and the proposed totex in our business plan, we consider that Ofwat should have been prepared to supplement its modelling with other approaches to assessing costs in order to properly understand the costs we had presented and test the theory of inefficiency implied by the modelling results.”
The company added that it stands by its business plan, and that it has followed “good industry practice” to come up with a plan that “included an appropriate efficiency challenge”.
“Our conduct throughout the process is consistent with that of a company that genuinely believes that its Business Plan is robust, efficient and properly reflects customers interests and is, therefore, worthy of being defended,” it said.
Bristol Water rejected the final determination from Ofwat on 6 February, and the case was referred to the CMA by Ofwat at the start of March.
In its response to Bristol Water’s statement of case, Ofwat defending its modelling process, saying: “the benchmarking models we adopted have been subject to an extensive testing and selection process, and have been verified by our expert consultants and advisors as robust.”
The regulator said the water company’s business plan was “a relatively high cost plan and the scope to make very significant efficiency savings”.
Ofwat added that Bristol Water failed to provide it with enough evidence that the higher bills it proposed in its business plan were justified.
“ allows for Bristol Water, operating efficiently, to deliver efficient investment in line with appropriate long-term plans in order to provide long-term resilience of its water supply system.
“We remain of the view that the price limits deliver a balanced outcome which fully satisfies our duties in this respect. We stand by our determination.”