Ofwat has formally referred the requests from five companies for a redetermination of their PR24 Final Determination to the CMA.
This commences the six-month period which the CMA has to consider appeals (subject to any request for an extension). The five companies whose requests have been referred to the CMA are:
- Anglian Water
- Northumbrian Water
- South East Water
- Southern Water
- Wessex Water
PR24
The PR24 determinations have set out a record £104bn investment funding for the sector. Ofwat believes this is sufficient to help safeguard the health of our waterways, improve the resilience of our water supplies, and raise the bar on companies’ day-to-day performance.
The increase in investment means that customers’ bills will increase from 1 April; many customers are already expressing concerns about the level of increase.
Ofwat said that while the companies have not yet set out the details of their reasons for appealing, their initial statements highlight the need for additional funding beyond the substantial increase already allowed. This would mean a further increase in bills for customers.
In its covering letter to the CMA Ofwat highlights that the price review was a collaborative, transparent and thorough process. Ofwat states that each company’s business plan was thoroughly reviewed, to set a package that included efficient and justified expenditure allowances, stretching but achievable performance commitments, and a fair balance between risk and return.
Thames Water
Thames Water requested a reference to the CMA last month, but has since asked for the formal reference to the CMA to be deferred for a period of up to 18 weeks. This reflects the company’s view that further discussions could result in steps that would unlock a market-led solution for the recapitalisation of the Company, including through an equity raise, without the need for the reference to the CMA.
Ofwat considers that this proposal creates the opportunity to recapitalise and transform the business sooner than is likely to be possible if the Company remains in the CMA redetermination process, and noted that following its final determination a range of potential equity investors presented proposals to lead this turnaround. Following discussion with the CMA, and given the regulators view that the final determination is in the best interests of customers and the environment, Ofwat has agreed to this request.
