Ofwat has been clear about the reasons these two succeeded (analysis, p15), and as Karma Ockenden suggests in her Expert View on p7, it’s highly likely they will accept the conditions outlined by Ofwat in January and progress to fast-track status. It’s good news for them, since they will be able to enjoy a package of benefits including multi-million pound financial incentives, financed by increases in customer bills, which is a bizarre reward for having made those bills affordable in the first place.
What of the other companies? Whatever disappointment, frustration and anger they felt on Monday morning will stay hidden. It would be a brave company that criticised the regulator in the middle of a price review, though plenty will be turning the air blue in private. As water companies struggle to get to grips with a brave new world (PR14, the Water Bill, competition, affordability, increased flooding, new technologies) the pace of change can sometimes seem staggering. The many changes happening to PR14 en route can only add to this sense of disorientation, though as Ockenden points out, the companies will be relieved to be spared the hurdle of being separated into “standard” and “resubmission”. This does mean, though, that all the companies have to effectively resubmit – a further round of judgement being handed down, with companies graded “good” or “bad”, with all the impacts on staff morale and investor confidence that entails.
Fast-tracking is in vogue for regulators. Ofgem did it, for RIIO, and only Western Power Distribution among the distribution companies won out. This has left the other networks restless, particularly because Ofgem is perceived to have moved the goalposts part-way through the process. Perhaps for the regulators, it’s a case of “divide and rule”. In future price reviews, as the regulatory process continues to evolve, a bespoke approach tailored to each individual company might be a more sophisticated solution.