Ofwat has today launched a new consultation on its proposals to adjust the outperformance and underperformance payments water companies in England and Wales can expect to receive or lose for the final year of AMP6.

Following its assessment of the difference between the 2019-20 performance assumed in the PR19 final determinations and actual 2019-20 performance, the regulator has published its draft ‘blind year’ adjustments which reconcile the forecasts of 2019-20 water company performance in England and Wales with actual 2019-20 performance data.

The majority of the interventions Ofwat is proposing relate to performance commitments and associated outcome delivery incentives.

The consultation document sets out the extent to which, for each company, the revenues and RCV adjustments included in the PR19 final determination for 2019-20 need to be adjusted to reflect actual performance.

When the 2019 periodic review (PR19) was completed in December 2019, the financial year had not finished. As a result, companies provided forecast data, which Ofwat considered and adjusted as necessary, for inclusion in the PR19 final determination.

The companies reported their actual performance for 2019-20 alongside their Annual Performance Reports (APRs) submitted to Ofwat by 15 July 2020.

Ofwat said that companies’ performance in 2019-20 compared to their forecast performance varies, with some doing better than expected and some not as well.

Where companies have performed better than expected, they may receive revenue payments, and where they perform worse than expected, they must return money to customers.

The adjustments are intended to ensure that customers only pay for the service standards that they receive.

Ofwat said that to ensure transparency, it expects the companies to publish any representations they make in full – the regulator also intends to publish all the written representations it receives on its website once it sets out final proposals.

Rachel Fletcher, Chief Executive of Ofwat, said

“Ofwat is committed to transforming companies’ performance for customers. The blind year reconciliation is an important step to hold companies to account and to maintain incentives on companies to continue to work hard to deliver for customers and the environment.

We look forward to continuing to work with water companies to transform performance over the coming five years to deliver more for customers, society and the environment.”

Deadline to submit comments or written representations to Ofwat is 19 October. The final proposals will be published by 13 November 2020 after the regulator has considered representations from all stakeholders.

Click here to download the consultation document.