So AMP5 starts today – and with the exception of Bristol Water, all of the other water companies in England and Wales accepted the Final Determination made by Ofwat in December about how much money they could charge their customers over the next five years to finance their investment programmes.
Bristol Water is now in the process of pursuing its challenge to Ofwat via the Competition Commission – with the deadline of 6th August for the Commission’s final report on the outcome of its review.
It is of particular interest that despite the fact that Ofwat encountered stiff opposition from the industry during the price-setting process which preceded AMP5, Bristol Water was in fact the only company to challenge the regulator’s decision.
Whether the companies will make it through the next five years without having to return to Ofwat to negotiate further price increases is a moot point. The companies have the option to seek price rises in the event of significant material changes to their circumstances – for example, hikes in the level of household bad debts or costs associated with the implementation of the Road Traffic Act. Ofwat has already concluded that this applies in relation to the acquisition of land by Thames Water for the Thames Tunnel part of the London Tideway Tunnels.
Today WaterBriefing is publishing a paper by Suzanne Rab, Counsel at leading law firm Hogan & Hartson LLP in London on Bristol Water's appeal and the likelihood of requests by water companies for price increases during AMP5.
Suzanne Rab advises clients across all areas of European and UK antitrust law and has appeared in proceedings before the UK competition authorities and the European Commission. A specialist in the water sector, she has also worked on some of the most high profile market and cartel investigations in Europe and the UK.
It will be interesting to see how the issue plays out in the light of the current tough economic climate, a General Election on the horizon, the push to introduce further competition into the marketplace and, last but not least, the role of the regulator Ofwat itself.
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