Consumer watchdogs have warned that the Competition & Markets Authority (CMA)’s decision on the PR19 appeals could set a precedent for other regulated companies and add to the pressure on household finances.
It follows yesterday’s publication of the CMA’s initial findings on the business plans from Anglian, Bristol, Northumbrian and Yorkshire Water, who all appealed Ofwat’s final determinations on allowances for the next five years.
Citizens Advice accused the CMA of acting in the interest of companies over billpayers in the redeterminations after Ofwat had permitted sufficient allowance.
Stew Horne, head of energy networks and systems at the customer advocacy group, told Utility Week: “Ofwat was too generous on the cost of financing, they could have gone £3 billion lower over the five years, but now the CMA has gone the other way.”
The implication of the CMA’s decision could be felt by billpayers in other regulated sectors, he insisted.
“The CMA is setting a precedent for price controls outside of water. It’s not only water customers that will feel the price pressures, which will have a significant impact on households. Some of the key metrics that we were disappointed with are common across the sectors. We think that’s really bad news for consumers.”
The CMA permitted additional spending on infrastructure projects, including leakage. Citizens Advice said that although the approach to spending on infrastructure projects differed to Ofwat’s, it was satisfied to see the justifications for the spend on issues that are important to billpayers.
“Although that will put a small amount on bills now to make good the networks, there are inter-generational payoffs,” Horne said.
Water watchdog, CCW, also welcomed the spending allowance for infrastructure projects. Mike Keil, head of policy and research at CCW said: “It’s good news for customers to see most of the enhancement and resilience schemes have progressed now.”
Customer engagement when writing business plans was encouraged by Ofwat and led to more consumer views being sought than ever before. However, on resilience issues and spending to mitigate the effects of climate change, the appellant companies argued that insufficient weight was given by Ofwat to billpayer support.
Citizens Advice said the level of consumer engagement in the water sector should be followed by other sectors, but Horne added it must not be used as a “carte blanche” for companies to get the answers they want.
“Those decisions have to be taken in the round, even with customer support, so we recognise it’s a really difficult job that regulators have to do to triangulate that evidence,” Horne said.
Keil said the need for engagement was “absolutely essential”, but it had to be done in the right way.
“There is a role for customers’ voices, and also for technical appraisal,” Keil said. “We don’t know yet if that balance was right. This raises a lot more questions than it answers.”