Sludge and water resources RCV allocations due within a year

Ofwat has issued a timetable and more details on the process it will follow in allocating Regulatory Capital Value (RCV) to water resources and sludge for PR19.

Each company will propose its own allocation(s); this will then be subject to regulatory scrutiny and judgement. In an information note, the regulator said company proposals on bioresources RCV allocation will be due by 29 September 2017. There will be a little more time on water resources, with proposals due by the end of January 2018.

Ofwat will publish further guidance for companies ahead of these dates in the case of each market: technical guidance on water resource RCV allocation will be available by the end of this month, with consultation on draft guidance to inform companies’ sludge asset valuation and RCV allocation to follow in March. It will make final allocation decisions as part of the PR19 final determinations in December 2019.

In May 2016, the regulator confirmed it would require explicit RCV allocations for sludge and water resources to support separate price controls, as part of the process of introducing markets to these parts of the value chain. RCV will be allocated on a focused basis for sludge (based on the economic value of the assets) and on an unfocused basis for water resources (based on the proportion of the assets used relative to the total assets of the business).