Regulator expects bigger bill cuts at PR19 to top PR14 says Ofwat director

Senior director of Water 2020, David Black, last week indicated Ofwat was expecting companies to beat the bill reductions they delivered in PR14 at PR19.

Speaking at SMI’s Smart Water Systems conference on Wednesday, Black (pictured) noted there would be variety company to company, but said: “There are certainly grounds for expecting we might see some companies top the largest bill reduction at PR14, a 10% reduction for water and wastewater company and 20% for a water only company, and the sector to match or beat the average 5% reduction from PR14. This is allowing for the head wind they face from move from RPI inflation indexation to CPIH, meaning that a real reduction in PR19 is more challenging than PR14.”

Black’s speech more broadly was devoted to outlining how Ofwat is regulating for innovation, and to driving home the message to companies that “innovation is a necessity, not a nice-to-have.” He detailed the long term demands on the sector, which he said had been supplemented by the following more immediate challenges:

  • Calls to move the sector back to a public ownership model.

  • Claims RPI-X regulation has reached its used by date and ought to be replaced with a system operator approach.

  • Significant anger following supply interruptions in certain parts of the country following the freeze/thaw incidents in late February and early March.

  • The challenge laid down to the sector by the UK government (and Ofwat) to improve financial resilience and legitimacy.

Black said: “To address the challenges it faces, the sector needs to find ways to do more for customers and the environment, while at the same time reducing cost. Impossible? Without, innovation, yes, but with innovation unlocking new ways of delivering service and new services, it becomes possible to square the circle.”