Every water company has accepted the licence modifications proposed by Ofwat to ready the industry for the next price review.
At the start of the month, the regulator announced it had secured universal agreement for the changes it drafted and consulted on in November under section 13 of the Water Industry Act 1991. These cater for: indexing revenues to CPI/H instead of RPI (it committed to deciding which by January 2018); setting four wholesale price controls (water and wastewater network plus controls, together with controls for sludge and water resources); establishing market information databases for sludge and water resource activities; and catering for in-period adjustments to revenues for ODI rewards and penalties at all companies.
Despite the sensitive nature of licence modification, the industry’s acceptance comes as little surprise given the drafting followed what Ofwat described as “an 18 month process of close and constructive engagement with companies on our future regulatory framework and the modifications themselves”. In particular, the regulator has since July worked with the 14 companies who indicated support in principle to develop the detail of the licence modifications needed to implement Water 2020 policy.
Ofwat will now work towards the modifications taking effect from 1 April. This will follow sharing the detail of company specific drafting with individual firms in the coming weeks to ensure each has the chance to consider how the changes will interact with their individual licence. Ofwat explained: “The conditions of each company’s licence are individual and may vary. Any company specific adaptations will not change the substance and intended effect of the proposed modifications.”
It added that some responses to the November consultation also raised points of policy associated with the licence modifications, rather than the proposed modifications. “We will reflect on these policy comments as we develop and finalise our PR19 methodology in 2017.”