Water UK, the representative body for UK water companies, has said too much pressure would be placed on Northern Ireland Water to make proposed efficiencies, in its response to the Utility Regulator’s draft determination of the price control 2013-2015 (PC13).
The trade association said the 6% per annum efficiency assumption made by the Utility Regulator is at the very top of the range realised by UK utilities since privatisation and the ability of NI Water to make such efficiencies is restricted by the governance arrangements that it works under coupled with the short duration of PC13.
The efficiencies would come on top of the “considerable” efficiencies achieved and anticipated in the 2010-2013 period, Water UK said. NI Water proposed efficiencies of around 2% for PC13.
Water UK said because of its governance arrangements, NI water is severely restricted in its ability to phase and flex its plans and so “this means there is a risk that service to customers will be compromised at a time when NI Water is facing significant challenges.”
“In our view, of upmost importance is the need to have the strategic debate and make decisions over the next two years about the long term arrangements for NI Water,” the response reads. “Putting too much pressure on the company now risks harming services to customers which would be likely to adversely affect the debate about the long term.”
Because NI Water is a non-departmental public body it is unable to deliver efficiencies at the level and speed of comparator companies elsewhere in the UK, Water UK said. Water companies in England and Wales are privatised, allowing them flexibility to establish, deliver and outperform their plans over five-year control periods without ongoing government involvement.
Water UK supports the development of a long-term (24 year strategy) and the Utility Regulator taking a more strategic view to the next price control, including that this might have a six year duration.
It also said however, that the governance arrangements should be reviewed to ensure they are ‘fit for purpose’ for a price control period of longer duration.
Water UK’s response concluded:
“We consider that the next two years should be about ensuring that NI Water continues to improve its delivery for the benefit of its customers and for its owner but that the efficiencies the Utility Regulator is proposing are too high and risk damaging customer services and hence distracting from and harming the strategic review to put NI Water on a stronger footing for the longer term.”
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