The Utility Regulator has today published its price control determination for Northern Ireland Water for the period 2015-21 (PC15).

The final determination is the Utility Regulator’s (UR) assessment of NI Water’s revenue requirements over the six-year period in the context of meeting targets contained within the Department for Regional Development’s Social and Environmental Guidance.

NI Water's Business Plan had proposed a revenue requirement of £2.43bn - the regulator has allowed an investment of £2.34bn. Unlike the totex approach used by the water companies in England and Wales in their PR14 Business Plans, NI Water's plan separately sets out capex and opex requirements. On Capex, NI Water has been allowed £1bn of capital investment made up of £556m (55%) for ongoing repair and replacement of assets and £446m (45%)  to deliver clearly defined and prioritised service enhancement outputs.

The remaining £1.34bn will be allocated to operational expenditure. The regulator's determination says that benchmarking information shows that NI Water is 22% less efficient than similar companies in England and Wales and spends £1.27 for every £1 spent by the more efficient companies. The UR has challenged NI Water to reduce their efficiency gap and deliver 2.3% per annum efficiency savings over PC15, saving the consumer £47m in 2012-13 prices.

The regulator determination will result in challenging but achievable outcomes including:

• lower bills for most water and sewerage (business) consumers - the majority of consumers will see reductions in bills under our price control;

• improved efficiency – challenging NI Water to deliver 11.5% real terms reduction in total operating expenditure by 2021 - building upon improved efficiency achieved within our first two price controls;

• continued significant investment in water and sewerage services - NI Water will continue to invest to maintain the existing assets and improve compliance with EU quality targets; and

• improvements in levels of service - current service measures will be maintained, the number of properties at risk of low pressure or internal flooding will be reduced and new consumer service measures will be introduced.

Commenting on the price control determination, Utility Regulator Chief Executive, Jenny Pyper, said:

“The publication of our price control determination marks the culmination of a two-year review which has involved a comprehensive process of analysis and assessment.  We are also grateful for the ongoing engagement with key stakeholders and the views provided by consumers.

“Our focus, as ever, is on delivering positive outcomes for water and sewerage consumers.  Our challenging determination builds on the progress made during previous price controls, ensuring that NI Water continues on its journey of improvement, and will bring lower bills, improved efficiency, continued investment and improvements in levels of service.

“As NI Water is partly funded by Government subsidy, any reductions in public expenditure allocations may impact on the implementation of the price control determination.  The final determination therefore provides for a process that will enable us to address such a scenario and will ensure that the company delivers the best possible package of outputs within the funding available”.

Key outputs include:

• Investment to maintain an existing asset base with a replacement value of over £9bn will maintain levels of service to existing consumers.
• Continued connection of new properties to the water and sewerage network and the release of development constraints.
• Investment in trunk mains to Cookstown and Strabane will improve security of supply in an area badly affected by recent freeze thaw events.
• Investment to alleviate the risk of internal flooding at 62 domestic properties and 836 properties affected by low water pressure.
• Investment in 19 wastewater treatment schemes to improve the quality of discharges from works > 250 population equivalent and upgrades of 45 small wastewater treatment works.
• Improvements to 56 unsatisfactory intermittent discharges to meet quality standards.
• Replacement or renovation of 905km of water mains and 74km of sewers.
• Proactive replacement of over 11,000 lead communications pipes at consumer properties in addition to lead pipe replacement under water main rehabilitation and in response to sample failures.

However, the determination itself draws attention to the fact that there is currently a review of government funding for many key services, saying that in the event of public expenditure reductions “it is likely that there will be an impact on the level of services and outputs.”