The water regulator said that not all companies were ready for it to set the non-household price control as part of the PR14 process.
It flagged up significant variation in water companies’ proposed profit margin from business customers, from under £20 to over £100 average gross margin per customer.
Given the significant amount of work some companies will have to do to justify or revise their proposed charges for business customers, Ofwat has given them advance notice of several options. Following the publication of draft determinations on August 29, water companies may wish to request a change to the form of the five-year price control to give them more time to consider and address any problem.
This could mean a shorter price control of one or two years, to give companies time to develop their cost and net margin allocations; or a different form of reopener that may allow changes to the price control as part of an overall five-year settlement.
Water companies will need to engage with customer groups over their plans for the non-household retail price control, which must be submitted to Ofwat by October 3, the closing date for representations following draft determinations on August 29.
The final determinations will be issued in December.