Northern Ireland Water will invest £324 million on “prioritised and targeted” areas to deliver infrastructure improvements, one of the key features of the price control determination for the period 2013-15, published by the Utility Regulator (UR) today.
The final price control determination (called PC13) sets out the Regulator’s price limits for water and sewerage services for the two years 2013-15.
The PC13 determination states that NI Water requires £703 million of revenue for the two-year period, an assessment based on benchmarking of the company’s costs and UR objective scrutiny of its performance.
The final determination will see bills and subsidy together being £58 million lower than NI Water’s business plan bid. This will result in lower charges for consumers – the Utility Regulator said charges will fall by an overall average of 6% below inflation in both 2013-14 and 2014-15.
The UR is challenging NI Water to close the operational efficiency gap between it and the industry in England and Wales by 5% per annum. For every £1 that comparative water companies in England and Wales spend in operating their businesses, NI Water spends £1.62 – an efficiency gap of 38%.
Higher levels of services are also being sought in PC13 by the UR as it plans for an improvement in the overall performance assessment (OPA) score, moving from 131 at the start of PC10 to 215 by close of PC13. This will narrow the service gap between NI Water and the water companies of England and Wales.
The UR published its draft determination in September 2012 and consultation closed in November. Following the consultation the UR has reduced the challenge for NI Water to make operational efficiencies from 6% a year to 5%.
It also responded to NI Water’s concerns regarding the impact of its status as a non-departmental public body. The UR said:
“While we agree that the current model is not ideal, the hard evidence is that NI Water has performed well under the independent regulatory regime. It has delivered operational efficiencies of more than 6.9% a year to date during PC10, while at the same time improving its overall performance assessment from a score of 131 to 184. The real challenge is for NI Water to sustain this momentum by focusing on reducing costs and improving levels of service.”
Commenting on the final determination, Utility Regulator Chief Executive, Shane Lynch, said:
“Our final determination focuses on delivering positive outcomes for water and sewerage consumers, maximising service improvements within the fixed capital budget available from public expenditure. Our determination challenges NI Water to deliver better value for its consumers, requiring it to reduce its operating costs further while improving the service to its consumers.
“Northern Ireland’s water industry can be as efficient, and provide as good a service, as anywhere in the world. NI Water has made strides towards this goal in delivering its first price control (PC10). PC13 seeks to continue NI Water’s journey towards this goal.”
NI Water will now consider the final determination. If the company decides not to accept the UR’s decisions it can ask to refer the determination as a whole to the Competition Commission. If NI Water decides not to refer the final determination, the determination will be applied over PC13 through the annual Scheme of Charges.
See the final determination in full here
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