Investing to boost resilience will not automatically justify bill rises at PR19

Speaking at a water sector conference hosted by Moody’s on Wednesday, Ofwat chief executive Cathryn Ross (pictured) told companies the regulator would not tolerate the behaviour it suspected in PR14 firms were working their business plans backwards from flat bills. “If any company out there now is thinking of working their business plan backwards from a flat bill, still less a baseline of flat bills with various ‘resilience increments’ on top, it ought to be obvious by now that this is not what good will look like,” she said.

She offered as an illustration the possibility of reducing bad debt costs from £21 to £9 as a way of offsetting – for instance – the £4 average cost addition Water UK’s long term water resources report published last month calculated would be needed to build resilience to drought.

Pursuing aggressive efficiencies and catering for resilience were among the themes for PR19 Ross highlighted in her Moody’s speech. Elsewhere she said Ofwat would:

• Offer more clarity upfront than it had at PR14 on what good looks like – by setting out principles rather than a “cook book”. The trade off would be it would not do as much “hand holding” through the process, particularly given the extra workload that will result from six price controls.

• Seek stretch in terms of customer service – partially a result of its recent detailed scrutiny of competitive markets. This will include integrating great service for customers in vulnerable circumstances.