Water industry regulator Ofwat has published proposals outlining how it expects companies to submit their business plans for the regulatory period 2015-2020, as it reveals its risk-based approach to reviewing companies’ strategies.
The new approach for PR14 will strongly encourage companies to focus on their customers rather than the regulator, it said. The consultation emphasises that the best business plans should show how companies have actively engaged with their customers and stakeholders. Their plans should clearly show how they have taken customers’ needs and wishes into account.
In the consultation, Ofwat said the new approach to reviewing business plans gives companies “greater freedom to innovate and to find the best way to present their plans.” It also puts the onus on water company Boards to ensure plans are “high quality” and outlines reputational, financial and procedural incentives for such business plans.
Ofwat accepted that its approach to business planning had been too prescriptive in the past and it has taken steps to return ownership of business plans to the water companies.
Water companies had to increase their stakeholder engagement for the upcoming business plans with independent customer challenge groups (CCGs) being set up so all customers could be engaged.
Ofwat said the views of the CCGs would be “crucial” in its review of a business plan.
“Companies with the best business plans will have engaged actively with their customers and stakeholders,” it said. “Their plans will clearly show how they have taken customers’ needs and wishes into account while meeting their statutory obligations.”
The consultation closes on 23 May 2013. Ofwat will use responses to this consultation to inform decisions on its final business planning expectations, which is expected to be published in summer 2013.
This consultation follows the January consultation on how Ofwat will set price limits from 2015 to 2020. Ofwat’s final methodology statement is expected to be published in early summer 2013.
Ofwat is also considering an earlier date of 2 December 2013 for submitting business plans. It said this would allow more time for engagement with companies, CCGs and other stakeholders so Ofwat can make more robust decisions on needs for resubmissions.
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