Ofwat has told the Competition and Markets Authority that the appeals submissions by Anglian Water, Bristol Water, Northumbrian Water and Yorkshire Water “represent an attempt to unpick selected parts of the package without necessarily considering it as a whole.”

Ofwat was responding to a question on 20 May 2020 during its presentation by the CMA panel currently conducting the Price Review 2019 redetermination inquiry which asked:

“I just wanted to give you the opportunity to expand on that if there are particular areas of your thinking, either as a result of evidence you have had since the determinations were made, or just generally having finished the process, whether from your point of view there are areas where you feel really that – I don't want to say you are uncomfortable with your decision – there are things that you really would like us to focus on and reconsider particular elements.”

The question is among a number of issues set out in a note published by the water sector regulator

intended to aid the CMA in making its redeterminations. The note says Ofwat is highlighting a number of issues, being either company-specific or applying to all disputing companies, which the CMA may want to consider in its assessment.

For all four companies, commenting on outperformance payments, Ofwat has told the CMA that under a company specific approach, the stretch could be increased.

The note also says that with regard to capital maintenance, for Anglian Water there is scope for a “downward adjustment by up to £55 million” to reflect the water company’s forecast costs associated with the transfer of private wastewater pumping stations.

Ofwat is pointing out that it has previously noted that the redetermination process is not a facility for referring specific issues, but one in which companies receive a full redetermination of their respective price controls. The note says:

“However, the disputing companies do not have an incentive to draw attention to instances where Ofwat may have made generous decisions. On the contrary, the submissions represent an attempt to unpick selected parts of the package without necessarily considering it as a whole.”

The regulator has told the CMA its aim is to redress the imbalance in the note by highlighting areas in which:

• changing one element of a company’s determination would have implications for other elements of the determination, which would needto be taken account of to make the determination appropriate in the round;
• evidence suggests its approach may have been conservative and there is a credible case for increasing the challenge on the company; or
• recent evidence suggests there is a case for adjustments to the determination.

Commenting on the impacts of the Covid-19 pandemic, the note says:

“We acknowledge that many of the impacts of Covid-19 on the water sector remain uncertain including the impacts on performance commitments and wider water sector costs. As the impacts of Covid-19 become clearer, we would welcome the opportunity to make further representations on the issue.”

Click here to read the note in full