Water companies in England and Wales will find out Ofwat’s initial assessment of their business plans for 2020 to 2025 in a key milestone for the regulator’s 2019 price review tomorrow (31 January).
In its assessment of each company’s plan, Ofwat will highlight where companies are delivering for customers and where it will be pushing companies to go further.
The 2019 price review (PR19) sets the price, service and incentive package that the water companies must deliver during the five-year period. As part of PR19, each water company in England and Wales has set out a business plan detailing what it intends to deliver and what it proposes to charge customers.
Business plans were submitted to Ofwat on 3 September last year. On the same day, Water UK published its manifesto for the sector, which revealed the plans were the result of an “extensive consultation exercise” with 5.3 million customers.
Ofwat will set out the work that water companies need to do on their plans, so they are “efficient, meet statutory and licence obligations and deliver more of what matters for customers, communities and the environment”.
The regulator will consider how the business plans demonstrate commitments to Ofwat’s four main themes for PR19 – affordable bills, great customer service, resilience in the round and innovation.
According to Water UK the water sector is set to invest more than £50 billion on improving services between 2020 and 2025 – a 13 per cent increase on the previous five-year business period.
Ofwat will categorise companies depending on the level of quality, ambition and innovation they have demonstrated in their plan.
The categories will be exceptional, fast track, slow track and significant scrutiny. Both exceptional and fast track business plans will benefit from procedural and financial incentives, through an early determination with “early certainty on specified components of costs and outcomes”.
Business plans categorised as significant scrutiny will receive reduced cost sharing rates and potentially capped outcome delivery incentive outperformance payments.
Companies that find themselves categorised as either significant scrutiny or slow track will be required to submit revisions to their business plans addressing the shortcomings Ofwat has identified by 1 April.
Meanwhile Ofwat will publish the draft determinations for companies with exceptional and fast track plans in early April.
Draft determinations for companies categorised as either slow track or significant scrutiny will be published in July, Ofwat has said.
The regulator is expected to publish final determinations for all water companies in December 2019.