Water industry regulator Ofwat has today confirmed that South West Water and Affinity Water have been awarded ‘enhanced’ status as part of its 2014 price review.
In March Ofwat pre-qualified South West and Affinity for ‘enhanced’ status based on the high quality of their business plans. Since then, both companies have accepted Ofwat’s guidance on risk and reward, including the cost of capital, and committed to a limited number of changes to improve their plans. Ofwat is satisfied that with these changes their plans will deliver the best outcomes for customers.
Ofwat will announce its draft determination on limits on prices for the two ‘enhanced’ companies at the end of April. The price limits will cover the period 2015 to 2020.
Ofwat’s Chief Executive, Cathryn Ross said:
“In this price review we challenged companies to change their approach and they have. I am pleased to see increased ownership from Boards and much greater engagement with customers. Such changes are crucial if the sector is to retain the necessary trust and confidence of the public.”
The other 16 companies will now need to submit new or improved evidence as part of their business plan. These companies will have the opportunity to request an earlier June draft determination on prices by submitting new evidence to Ofwat by the beginning of May 2014. Draft determinations for all other companies will be issued in August 2014.
Final determinations on limits on prices are due to be announced in December 2014.
Water companies submitted their business plans to Ofwat on 2 December 2013. On 18 December 2013, Ofwat announced that companies’ proposals on risk and reward were not in line with its expectations. As a result, on 27 January 2014, Ofwat issued guidance on risk and reward, including a weighted average cost of capital of 3.85%.
The draft determinations for South West Water and Affinity Water will be published on 30 April 2014.
Ofwat’s Chief Regulation Officer, Sonia Brown added:
“Our process aimed to encourage high quality, customer-focused plans. South West and Affinity’s plans really stood out. Both the company and their customers will benefit from being enhanced. There is still a way to go before we set final prices in December. We are focused on making sure all companies’ plans deliver the best deal for customers.”
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