In the latest stage of the PR19 appeals inquiry, iCON Infrastructure LLP has written to the Competition and Markets Authority (CMA ) saying it is “deeply concerned” about “the highly aggressive posture adopted by Ofwat in response to the redeterminations generally, including threats of judicial review following the CMA’s Provisional Findings.”
In response to the CMA’s recent Working Paper on 2019/20 data for base cost models, iCON Infrastructure . said it was writing in the capacity as a longstanding investor in the sector, which currently involves it in advising the iCON Infrastructure family of institutional funds that own 80% of Bristol Water plc.
The letter says:
“We have been deeply concerned that the highly aggressive posture adopted by Ofwat in response to the redeterminations generally, including threats of judicial review following the CMA’s Provisional Findings, has created undue pressure on the panel (and water companies more widely) with resulting potential risks to objective and fair redeterminations by the CMA.”
According to iCON Infrastructure, its review of the Working Paper, together with its review of the CMA’s cost of capital Working Paper has heightened these concerns, for two reasons in particular:
- the limited scope of these consultations (especially insofar as they specifically relate to Bristol Water’s position
- the apparent weight attached to opinion versus objective and properly interrogated data and evidence
In the investor’s view, as the process has progressed, it has become “increasingly evident that an overarching PR19 “narrative” appears to have driven the regulator’s selection, specification and interpretation of data, sometimes in the face of actual sector history, practices and regulatory precedent.”
The letter goes on to express iCON Infrastructure’s alarm that the CMA's consultation papers “create room for the suspicion that a similar approach risks filtering through to the CMA’s redetermination.”
“The Working Paper appears to adopt a subjective approach coupled with contortions in seeking to establish a “narrative” that the 2019/20 data is somehow “unrepresentative”, on the basis of which it then surprisingly settles on the most extreme approach of ignoring the 2019/20 data,” the letter says.
iCON goes on to flag up what it describes as an example of shortcomings in the CMA Working Paper’s analysis as “the manner in which sprinklings of anecdotal, second‐hand commentary has been relied upon as a key underpinning of the conclusion reached to exclude the 2019/20 data.”
Referring to paragraph 10 of the Working Paper, where the CMA “summarises Ofwat’s proffered selection of some companies’ purported quotes regarding timing of investment", the letter says:
“These comments are neither “reliable” nor “complete”, let alone supportive of the particular interpretation taken. ..
“The quotes refer to “investment” and include verbiage such as “in readiness for the 2020‐25, rather than investment brought forward”, “to ensure it was in the best possible position to deliver 2020‐25 targets” and “in preparation for AMP7 targets”. It could be said that everything a long‐lived water company does in terms of “investment” is in preparation for the future, so all of this is just stating the obvious rather than indicating any spend brought forward from AMP7 as the Working Paper seems to leap to conclude.”
iCON goes on to question the CMA’s statement in the Working Paper that “the comments from the water companies to Ofwat indicated that their overspend was, at least partly, due to the targets set in PR19“.
The letter says:
“This seems to accept the reliability and completeness of this commentary and Ofwat’s interpretation, with limited (if any) challenge.….Compounding the described analytical weaknesses, representations on which the Working Paper’s provisional findings are explicitly based do not appear accurate.“
iCON Infrastructure concludes:
“Given the extension of the deadline for the redeterminations to March 2021, we believe that the CMA has the time and space to undertake a thorough, evidence‐led, analysis of the inclusion of the 2019/20 data.”
Click here to read the letter in full
“SAS (Surplus Activated Sludge) is a bit weird and 
Owen Mace has taken over as Director of the British Plastics Federation (BPF) Plastic Pipes Group on the retirement of Caroline Ayres. He was previously Standards and Technical Manager for the group.
PureTec Separations, the Ledbury-based water treatment engineering firm, has appointed Dan Norman as its new Sales Manager – Water Process Systems, supporting the company’s continued growth in the UK and international markets.
bNovate has launched BactoCloud, a secure cloud-based platform that connects and manages its BactoSense instruments, enabling real-time monitoring and optimization of microbial water quality.
Hear how Scottish Water has completed its £235 million Ayrshire Glasgow Resilience Project - customers across Greater Glasgow, Ayrshire and East Renfrewshire will now benefit from a more secure and resilient water supply.
Hear how United Utilities is accelerating its investment to reduce spills from storm overflows across the Northwest.
Find out more about the remarkable career opportunities on offer at WSP - scroll down to watch the inspirational video.