The inflation link to wholesale prices will be preserved but Ofwat will retain flexibility to, for example, move sludge disposal outside the wholesale control, it said. There will be a “materiality test” to make sure flexibility does not come at the expense of companies’ ability to finance the wholesale function.
The regulator committed to provide certainty on the scope of licence modifications by spring 2013, when it finalises its detailed price setting methodology. And it promised to be transparent about its reasoning.
The document claimed: “The companies agree that the principles are a good starting point for further discussions and are willing to work collaboratively with us to develop the final modifications.”
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