Ofwat has today revealed that the budget for the opening of the water market to competition for non-household customers in 2017 is now £41.8 million for the period 2014/15 through to 2016/17, with the majority of the additional costs coming from designing and implementing the central settlements system.
This has seen the budget jump from the mid-level estimate of £25.3 million that was set out in 2013.
The water companies will have to pay the increase in costs via an allowance in their wholesale price limits. If this fails to cover all of the additional costs, the extra will be borne by investors unless further allowances are made in PR19.
The budget covers the entire cost of the market opening programme, including the work being undertaken by Ofwat, that of Market Operator Services Limited (MOSL) and the tender for the central IT systems – which is currently down to a shortlist of four bids.
Speaking exclusively to Utility Week, Ofwat chief executive Cathryn Ross said the cost increase has been identified because now the design phase of the programme is complete, the regulator and MOSL have a clearer understanding of costs.
She said: “Now MOSL and Open Water Markets Limited have done the specification of the central settlement system, we’re in a much better position than we were or could have been a year ago to know what this is going to cost.
“Obviously you do due diligence but when you do that designing work you get more and better information of what is going to be involved.”
She added that the “budget is going to be kept under scrutiny” by Ofwat and that the final total could be lower, but that the £41.8 million budget “is a fair number based on good information.”