Bristol Water has rejected Ofwat’s latest price determination and will be seeking a review by the Competition and Markets Authority (the CMA).

The Final Determination, published on 12 December 2014, sets the allowed levels of total expenditure and investment companies can make to improve and protect water supplies. It also set the price controls which apply to companies’ retail and wholesale activities and which determine the level of customers’ bills over the next five years.

Ofwat set the allowed level of total wholesale expenditure for Bristol Water at £409m and reduced the average household bill from £197 to £162 in the first year followed by four years of £152; this amounts to a 23% reduction (figures are based 2012/13 price base).

Bristol Water’s business plan for 2015 to 2020 had proposed wholesale expenditure of £541m and a reduction in average household bills of 4.5%, or £9 in real terms, to £188.

"Clearly a discrepancy in calculations because of the size of the gap"

Chief Executive Luis Garcia said:

“The Final Determination makes it very difficult for us maintain our levels of service and make sufficient investment to deliver the enhancements needed to improve and protect the water supply that our customers told us they wanted, for now and in the future.” 

“Throughout this process we have engaged fully with Ofwat and we have consulted with 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 do not believe that the determination Ofwat has set is in the long term interest of our customers and stakeholders  and we believe that a review by the CMA will result in a better outcome. There is clearly a discrepancy in calculations because of the size of the gap and the CMA is the only fair way to resolve this,” he added.

The CMA, formed as a merger of the Competition Commission and the Office of Fair Trading, is an independent non-ministerial department with responsibility for appeals and promoting competition for the benefit of consumers.

The CMA will appoint a panel of members to adjudicate this case. Bristol Water will then submit a statement of case to the panel which will be reviewed along with responses from Ofwat as well as statements from industry and regulatory stakeholders. The process is expected to last six months in accordance with the statutory timetable.