Ofwat has today launched a consultation on a number of proposed changes to the licences of the 17 largest water companies.
In May 2016, the water industry regulator set out the framework for the 2019 price review and development of wholesale markets. To implement the changes, Ofwat is now seeking to update the conditions in the licences all companies need to supply wastewater and water services to customers.
Launching the consultation, Ofwat said:
“We want the licence to support the changes we are making to how we regulate, which will help companies respond to and meet the challenges within the sector and contribute to improving resilience and drive efficiency, so helping to maintain affordable bills for customers. “
The proposed changes are:
- Change to index price controls based on the the Consumer Price Index (CPI) or Consumer Price Index including owner-occupiers' housing costs (CPIH) instead of the Retail Price Index (RPI). Using this less volatile index means less uncertainty for customer bills and stakeholders.
- Set separate controls for Water Resources and Bioresources (also known as sludge) and water and wastewater network plus controls.
- Establish market information databases in relation to Water Resources and Bioresources activities. Both of these would enable the market to open up in bio and water resources, potentially unlocking substantial benefits to customers, companies, investors and the environment.
- Allow in-period adjustments to price control revenue for outcome delivery incentive (ODI) rewards and penalties for all companies.
David Black, Ofwat Senior Director said:
“We want to ensure that customers and wider society have trust and confidence that their water and wastewater services are of a high quality and are provided in an environmentally sustainable way which is resilient and affordable.”
“This is why it’s important for us to look at making changes to water company licences to drive forward improvement and encourage opportunities to open up the markets in water and bioresources.”
The deadline for the consultation is 7 December 2016. Once finalised, the licence changes will be an important step in reforming the way price controls will be set in 2019.
Click here to download the consultation paper
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