Ofwat has announced the measures it is taking to enable Thames Water’s activities on the Tideway Tunnel to be regulated under a separate price control.

Ofwat has made modifications to the water company’s licence following a recent consultation on its proposals.

Setting out the background and reasons for the modification, the regulator explained that given the unprecedented scale, risk and complexity of the project, the UK Government has specified the project to be delivered by a third party IP and has set out that certain preparatory works within the specified project are to be carried out by Thames Water.

Ofwat said that given the different risk profiles for the TTT compared to the rest of Thames Water’s activities it was important that there is a clear boundary not only between Thames Water’s and the IP’s activities in the project, but also between Thames Water’s activities in the project and the rest of its activities.

This is necessary not only to ensure Thames Water delivers its activities in the project efficiently, but also to ensure effective regulation of the activities and to provide transparency for stakeholders. The  regulator considers that this is best achieved by setting a separate, binding price control for Thames Water’s activities in the TTT project.

On time limiting the TTT control, Ofwat has now accepted Thames Water’s view that the TTT price control should expire in 2020 and fold back into its wholesale wastewater control. Ofwat had previously said that the TTT price control should endure, at least through to the end of the construction phase of the project.

Ofwat said:

“In order to reach agreement with Thames Water, we have accepted that the modifications should only be in place for the next price review. However, we have made it clear to Thames Water that we will revisit this issue before the next price review. This will allow us to take into account the emerging thinking about the methodology that will apply for the price review that will be conducted in 2019.”

Ofwat made the proposed modifications to condition B of Thames Water’s licence on 8 December. Details of the separate price control for Thames Water’s activities on the TTT will be set out in Ofwat’s final determinations for 2015-20, which will be published tomorrow.