All water companies across England and Wales will submit their five-year business plans to Ofwat today (3 September) for the next price control period.
As part of the regulator’s 2019 price review, PR19, all water companies must set out a detailed business plan, outlining how they will meet the needs of their customers from 2020 to 2025 and beyond.
Ofwat said plans should cover a range of matters including what companies propose to invest and what they will charge customers, how they will support vulnerable customers and how they will ensure the long-term resilience of their infrastructure and operations.
The regulator has four main themes in PR19: great customer service, affordable bills, resilience in the round and innovation.
It will scrutinise all the business plans before publishing an initial assessment of each company’s plan on 31 January 2019. Ofwat will categorise companies’ plans according to the level of quality, ambition and innovation they have demonstrated.
The best plans could benefit from incentives through the price review process, while those that fall short will face closer scrutiny and interventions and could receive lower returns.
The categories water companies will be placed into will be: exceptional, fast-track, slow-track and significant scrutiny.
Both exceptional and fast-track business plans will benefit from procedural and financial incentives, through an early determination with early certainty on specified components of costs and outcomes, Ofwat said.
While business plans categorised as significant scrutiny will receive reduced cost sharing rates and potentially capped outcome delivery incentive outperformance payments.
John Russell, senior director for strategy and planning at Ofwat, said: “We’ve reached a key milestone in our price review process. From now until January 2019, we’ll pore over each and every business plan and we’ll be looking for evidence that they are robust, ambitious and, crucially, that they have been shaped by customers.
“All companies have had an opportunity to develop high-quality plans, but where plans aren’t sufficiently ambitious or stretching, we’ll step in to protect customers and the environment.”
Tony Smith, chief executive of the Consumer Council for Water, added: “This price review could define the future of the water industry in England and Wales. Reputationally, there is a huge amount at stake, and today’s publication of business plans represents a key opportunity for water companies to restore consumer trust by proving to their customers that they’re taking positive and decisive action on the issues customers care about.
“We will be spending the coming weeks and months scrutinising these proposals and challenging companies that we think have come up short in meeting the needs of customers, while pressing the regulator to make sure the plans minimise any bill impacts on customers.”
In March/April next year, Ofwat will publish draft determinations for companies with exceptional and fast-track plans.
Companies categorised as either significant scrutiny or slow-track must submit revisions to their business plans by April 2019, addressing the shortcomings Ofwat has identified.
In July 2019 Ofwat will publish draft determinations for companies categorised as either slow-track or significant scrutiny.
The regulator will make final decisions on the services water companies must deliver and limits on the prices they can charge customers in December 2019.