Bristol Water has warned that Ofwat’s Final Determination which excludes the proposed new reservoir at Cheddar in AMP6 could lead to higher costs and impact its ability to meet future demand for water.
The water company was commenting on the outcome of the regulator’s final decision on its Business Plan for the upcoming 2015-20 investment period.
Ofwat announced in its Final Determination that it has not allowed the funding Bristol Water had proposed to start the initial construction phase of Cheddar Reservoir Two in 2015-2020. The water company said it had explained in both its Business Plan proposals and in its Water Resources Management Plan why Cheddar Reservoir Two is the most economic and environmentally sound solution to meet future demand for water.
Although Ofwat has accepted that more water resources are required in the water company’s supply area from 2030 due to population growth and additional commercial activity, it has decided not to allow any funding in the period to 2020. Bristol Water said:
“This delay may, however, result in additional cost and impact upon our ability to meet future demand for water.”
“Levels of expenditure and investment will be much lower”
Bristol Water also said that under the Final Determination the reduction in the average household bill will be much greater than proposed in the Business Plan and the levels of expenditure and investment allowed to improve and protect customers’ water supplies would be much lower as a result.
Ofwat has raised the allowed level of total wholesale expenditure for Bristol Water to £409m from its Draft Determination level of £358.9m - the average household bill will fall to £164 in the first year followed by four years of £152.
Bristol Water commented:
“We will now carefully study Ofwat’s Final Determination, analysing the detail in full before deciding whether it is in the best interests of our customers and stakeholders to accept the regulator’s determination.”
“Throughout this process we have engaged fully with Ofwat and we have consulted our customers to ensure that their views and priorities have shaped our Business Plan. We are very confident that our proposals for 2015-2020, combining service improvements and price reductions, meet our customers’ requirements and expectations. “
“We will therefore have to consider carefully whether Ofwat’s Final Determination will allow us sufficient expenditure to maintain levels of service and sufficient investment to deliver the enhancements needed to improve and protect the water supply for our customers.”
The water company now has until February 12th (two calendar months from the final determination) to decide whether to accept Ofwat’s Final Determination or to ask Ofwat to refer it to the Competition and Markets Authority (CMA).
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