Sutton and East Surrey Water’s revised AMP6 Business Plan is retaining a Weighted Average Cost of Capital (WACC) of 4.75% to deliver greater investor returns during 2015-20, compared to regulator Ofwat’s guideline of 3.85%.

The water company said it had sought third-party professional advice on an appropriate range for the cost of capital for a small water-only company from  Oxera and Frontier Economics.

In response to feedback received from Ofwat, Sutton and East Surrey Water has submitted further evidence and made some minor changes to its Plan. The evidence does not change the key elements of the Plan and is part of the company’s ongoing dialogue with Ofwat.

As before, the Business Plan commits to:

• keeping average bill charges at current levels before inflation in the period 2015-2020

• introducing a social tariff to help customers in genuine financial difficulty

• continuing to reduce leakage which is already close to the lowest level in the industry.

Following detailed discussions with Ofwat, Sutton and East Surrey Water has built on earlier extensive consultation with customers on the acceptability of the Business Plan with a particular focus on the rewards and penalties for exceptional/poor performance.

Following guidance from the regulator – supported by customer research – the Company proposes to increase the penalties and rewards within the Plan. However, this will have no impact on bills until 2020. The resubmission provides Ofwat with more information about the Company-specific costs and explains how Sutton and East Surrey Water will be accountable for the delivery of its commitments (or promises) to customers.

“Our Business Plan matches the outcomes with appropriate ‘measures of success’ and targets for the next five years”, said Managing Director Anthony Ferrar. “These will help provide the necessary protection and transparency for our customers to enable them to monitor our performance and know whether we are meeting expectations, exceeding them or falling short.”

An important element of the Business Plan is the inclusion of projects consistent with the strategy of making the Company more resilient to droughts, flooding and equipment failure.

Retail competition will be introduced for all non-household customers in 2017, to stimulate higher service levels and offer more choice. “We welcome this challenge and are actively embracing the opportunities presented,” said Mr Ferrar.

“Our revised Business Plan has been discussed with and reviewed by our Customer Challenge Group and we believe it provides a good and fair deal for customers while maintaining our ability to continue to improve our performance and provide long term stability.”

Ofwat will review the resubmission of the Business Plan and issue a Draft Determination on 29 August. The Company will then have until 3 October to make representations to the regulator.