Having accepted the guidance, which includes a weighted average cost of capital (Wacc) of 3.85 per cent, South West Water and Affinity will benefit from a fast track through PR14 as well as financial rewards of up to £17 million and £7 million respectively.
In an announcement on the London Stock Exchange this morning, South West Water said it had submitted an updated business plan to Ofwat and awaited the regulator’s confirmation on 4 April 2014 that the new proposals were acceptable.
Water only company, Affinity Water, also released a statement saying it “looked forward” to the conclusion of Ofwat’s risk-based review in April.
According to South West Water, its updated business plan could see average prices falling by 13 per cent in real terms by 2020.
The Consumer Council for Water said it was “gratifying” that the company had continued to recognise the issue of affordability.
Chris Loughlin, South West Water chief executive, said: “Our business plan got big thumbs up from customers who helped to shape it, and it has been praised by the regulator. It represents a real partnership with the communities we serve.
“We recognise that hard-pressed households and businesses want value for money and continued investment in services and the environment. We look forward to delivering on their behalf.”
Ofwat will publish draft determinations for enhanced companies on 30 April 2014.
Last week Ofwat also gave companies that have not pre-qualified an opportunity to accelerate their progress through the price review and request an earlier draft determination by submitting new evidence by the beginning of May 2014. If this new evidence meets the required standard, Ofwat will issue draft determinations for these companies in June 2014.
Draft determinations for all other companies will be issued in August 2014.