The Wacc was reduced from 5.1 per cent in PR09, down to 3.85 per cent for PR14, but Sonia Brown, chief regulation officer at Ofwat, told Utility Week “market evidence is telling us that the cost of debt has decreased” since the draft determination guidance was issued in January.
She said: “We will be asking ourselves whether that cost of capital should come down for customers for those final determinations.”
Brown added: “We’re going to be challenging hard for customers right the way through to the final determination.”
The draft determination proposals, published on Friday morning, would save customers more than £2 billion over the next five years, equating to a 5 per cent reduction in bills.
The PR14 decisions would also see a £43 billion investment programme, resulting in a 40 per cent reduction in supply interruptions, and more than 340 million litres of water a day saved via greater efficiency and improved leakage rates.
Cathryn Ross, chief executive of Ofwat, said: “Our challenge to companies has resulted in the sector’s biggest ever customer conversation.
“Delivering for customers rather than ticking regulatory boxes will drive what companies do over the next five years.
“Some will find this tough, but companies which really stretch themselves will reap the benefits of increased customer trust and confidence.”
The Consumer Council for Water (CCWater) welcomed the news that bills are set to fall in real terms, but Tony Smith, CCWater chief executive, said “there is still an opportunity for Ofwat to deliver an even better deal”.
He added: “We will continue to press Ofwat and the companies to minimise what customers have to pay.”
A consultation period on the draft determinations is now open and representations to Ofwat have to be made by 3 October.
The final decisions will be published in December, with the water companies set to introduce the new plans from 1 April 2015.