Ofwat toughens its resolve: PwC’s detailed summary of Ofwat’s PR19 Final Methodology
21 December 2017
by Richard Laikin, PwC’s Water Sector Leader and water sector experts, Nicky Fomes and Nick Forrest
Ofwat published its Final Methodology for the next water industry price control (PR19) on 13th December. In response, we set out the key changes between Ofwat’s draft methodology and its final methodology in a blog.
With time to digest the methodology, we are now publishing a more detailed summary outlining what this means for both water and wastewater companies. We set out each key area of the methodology along with brief commentary and analysis, presenting Ofwat’s overall approach to assessing business plans as well as the “test” areas. We also score each key issue on the extent to which Ofwat’s approach might present a challenge to companies.
As you might expect, the regulator continues to raise the bar for the quality of the business plans it expects the companies to produce.
Ofwat has structured its methodology around four key themes for PR19: customer service, affordable bills, long term resilience and innovation. These themes underpin the methodology, along with the nine (or ten, if board assurance is split out separately) test areas against which Ofwat will assess companies’ plans.
We consider that many companies will find PR19 to be a substantially more challenging price control process. Indeed, the regulator has stated it is possible no company will achieve the new “exceptional” status (which replaces the “enhanced” category of business plan assessment used at PR14).
While PR19 cannot be described as a revolution to the regulatory framework, there are important changes which require a new approach – companies cannot simply rely on the approach they adopted in PR14.
To view our detailed summary of Ofwat’s PR19 Final Methodology, click on the document link below.