Ofwat is today confirming the financial penalties and payments for all water companies for the 2022-23 year, with the majority of companies having to return money to customers. Thames Water will return the most to customers, with a final determination of £73.8 million.
The determinations also include funding for the green recovery programme.
The final determinations follows on from the announcement of draft decisions in September, the consultation for which closed on 18 October 2023.
For some companies the final revenue adjustment that will be applied to 2024-25 can differ from the reported outcome delivery incentive (ODI) payments for the year because other adjustments may be included.
For example, Severn Trent's revenue adjustment includes additional funding for Green Recovery investment, and the recovery of deferred outcome delivery incentive payments from previous years.
There are some changes for specific companies from the draft decisions.
The amount being returned to customers by Southern Water accounts for an additional £21 million which will be deferred to 2025-26.
Ofwat also adjusts the size of water companies' net ODI payments to reflect their marginal rate of corporation tax. Commenting on the adjustment, the regulator said:
“This ensures that companies receive the level of ODI payments as envisaged in the PR19 final determinations, which maintains the degree of financial incentive intended by PR19. If we did not do this, the financial incentives PR19 intended for companies would be weakened.
“A 0% tax rate has been applied to Thames Water and Anglian Water, after adjusting for the funding those companies received at PR19 (when it was assumed that they would pay some tax during 2020-25) to ensure fairness to customers. This change is based on additional evidence submitted by the companies, including substantive detail on their tax losses, as well as the benefits of 'bill smoothing' measures.
The ODIs are the financial or reputational consequences for the companies of outperformance or underperformance against their performance commitments. Performance against the majority of performance commitments is reviewed annually so the financial consequences happen close in time to company performance and customer experience. The payments will affect the amount of revenue companies can recover from customers through their 2024-25 bills.
Click here to download Sector overview: Final Determinations of in-period outcome delivery incentives
Click here to access the individual companies' Final Determinations
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