Ofwat toughens its resolve for PR19, requiring higher levels of transparency and engagement with customers

12 January 2018

Ofwat has published its final methodology for the PR19 price review, continuing to raise the bar on the standards expected from the water industry. 

Its statement that typical household bills should decrease by £15-25 a year underlines the regulator’s expectation that companies will deliver a step change in efficiency and that customers will benefit from financing benefits due to lower cost of capital (WACC). 

The regulator has continued to tighten performance targets, meaning companies must simultaneously improve service to customers across a wide range of metrics.

One of the important changes from the draft methodology is that Ofwat has strengthened the requirement for companies to adopt high levels of transparency and engagement with customers, including through corporate and financial structures.

Ofwat continues to set very high expectations of customer engagement and the use of valuation techniques in their business plan proposals, requiring a “step change” from PR14.  This will now be challenging to meet if any company is not in the very advanced stages.

With much to do before the September 2018 business plan submission date, it is a challenging time for water and wastewater companies. Pressure is mounting to create robust plans in line with the methodology and deliver the quality of evidence Ofwat is looking for.

PwC is well-placed to support with designing and implementing a customer engagement programme to support your preparations for PR19 and business plan submission:                     

  • PwC Research is a dedicated, in-house market research capability – a specialist provider of research and evidence-based consulting services. Our team has direct experience of designing and conducting customer engagement programmes for regulated utilities' clients, including 'willingness to pay' research.
  • We have a strong track record of employing innovative research approaches and techniques which can withstand regulatory scrutiny from regulators including Ofwat, Ofgem and Ofcom.
  • We have deep insights into Ofwat’s thinking and an excellent understanding of PR19 - PwC was Ofwat’s delivery partner during the PR14 price control. We have also worked alongside Ofwat as the regulator prepares for PR19.  We understand the way that Ofwat’s thinking has evolved and how water companies need to respond

To find out about some of the other important changes from the draft methodology, visit PwC's Energy Spotlight blog or contact Cliona O’Beirne ([email protected]).

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