The regulator will levy an extra £3.2 million on licence fees this year and seek industry agreement for a further hike of £7.5 million to £26.6 million in 2014/15. It has already announced it will draw on reserves of £1.8 million that was left unspent from previous years.
The Audit Committee is to look into how the organisation failed to budget enough for the large scale changes planned to the way it sets prices. The regulator is outsourcing a large chunk of the peak workload to a delivery partner, as revealed by Utility Week in May.
According to analysis by consultancy Pricewaterhouse Coopers for Ofwat, changes to the methodology will benefit customers to the tune of £2 billion on top of expected efficiency savings. In particular, separating the retail price control will encourage more focus on customer-facing activities while measures to encourage water trading will make companies use water more efficiently, it said.
Regina Finn, outgoing chief executive of Ofwat, said: “There has been broad support for our plans which align with a culture that is changing in the water sector. We want companies to move away from ticking regulatory boxes and to concentrate instead on the importance of delivering for customers now and in the future including the environment.”
Companies are encouraged to focus on long-term outcomes and consider innovative ways to meet them, in their business plans to be submitted on 2 December, as well as giving customers a greater say.
Finn added: “It’s now time to deliver. Companies need to listen to their customers and come up with plans that show how they will meet the challenges facing the sector, such as affordability and long-term sustainability.”