Portsmouth Water has written to the water industry regulator confirming its acceptance of Ofwat’s Final Determination for its AMP6 Business Plan.
In a letter to Cathryn Ross, Chief Executive of Ofwat on16th January, Neville Smith Managing Director of the water company confirmed that the Board did not want Ofwat to refer the Determination to the Competition and Market Authority for external review..
In a separate letter he also confirmed that at this stage the company it does not wish to alter any components of its Outcome Delivery Incentives. Portsmouth Water has also sent Ofwat an Assurance Statement from the Board for its proposed charges for the year starting 1 July 2015.
The Board has also thanked the Ofwat team at for the approach taken at the reviewsaying it believes the outcome will benefit Portsmouth Water customers in the future.
Neville Smith also told the regulator that having considered the issue of the menu choice, the Board wants Wholesale Totex to remain as per its original Business Plan submission, at £137.026m in 2012/13 prices for the 5 year period. This results in a Totex ratio of 96.504%, as per the Final Determination.
Portsmouth Water has also chosen not to re-calibrate its Outcome Delivery Incentive (ODIs) rewards or penalties at this stage, taking the view that as the Totex ratio is less than 100%, the recalibration of rewards and penalties would be slightly in its favour, saying:
“Therefore we believe, in the interest of minimising any potential confusion, it is better for us to remain as per Final Determination.”
Assurance of proposed 2015/16 Charges
A separate letter to Ofwat confirms that the Board of Portsmouth Water believe that the tariffs and associated Charges Schemes sent to Ofwat on 16 January 2015 for approval comply with its regulatory requirements.
On 3 October 2014 the company submitted an early indication of proposed charges for 2015/16 to Ofwat based on the Draft Determination. In its feedback to the Portsmouth Water, Ofwat highlighted a number of issues and required an update on progress in addressing the issues by 12 December 2014. The letter says that this was duly undertaken but that to date no feedback had been received on its report, commenting:
“The Board believe this submission has addressed the concerns highlighted and indeed are able to state that such issues do not arise in this submission.”
The letter also confirms that the charges result in compliance with the three revenue caps of wholesale, household retail and non-household retail and that the costs associated with Open Water are appropriately recovered from Portsmouth Water’s non-household customer base only.
The water company engaged Frontier Economics as a third party to review the submission. Portsmouth Water said it had also consulted the Consumer Council for Water in a “timely and effective manner” on the charges schemes.
New charges will come into effect in April 2015. The water companies have two months in which to accept Ofwat’s Final Determination which was delivered on 12th December, or seek a referral to the Competition and Markets Authority.
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