Four firms seek watchdog referrals based on fears for resilience and financeability

Three water and sewerage companies (WASCs), and one water only company, last week asked Ofwat to refer their PR19 final determinations (FDs) to the Competition and Markets Authority (CMA).

While there are company specific considerations, the three WASCs – Yorkshire Water, Anglian Water and Northumbrian Water – share common concerns that their customers have not been listened to; that Ofwat has struck the wrong balance between bill cuts and investment; and that their long-term financial resilience is jeopardised by Ofwat’s stance.

Yorkshire Water

First to announce on Tuesday was Yorkshire, which said it could not accept the long term risks to its resilience and customers the FD posed. “The overall approach to the determination, including as it does poorly designed penalty measures over the next five years means that the company would be forced to focus on short term performance at the expense of longer term capital investment, vital for securing resilience of critical water and wastewater infrastructure in Yorkshire.” Chief executive Liz Barber (pictured) added: “We’re naturally committed to being the most efficient company we can, but have decided that accepting this determination would jeopardise Yorkshire’s resilience and our own.”

Anglian Water

Anglian had a similar rationale, writ large it said by the particular challenges its region faces and its now embedded commitment to social and environmental purpose. Chief executive Peter Simpson commented: “Social and environmental needs are firmly embedded in our business purpose. We have a long term focus on improving the resilience of the region, and investing in infrastructure to cope with the impacts of climate change and population growth. As we do not believe the FD enables us to meet these needs, we are making use of the next step in the regulatory process and asking the CMA to consider if the right balance has been struck between bill reductions and investment.”

Northumbrian Water

Northumbrian said its FD “falls well short of what customers clearly stated were their priorities” and which its plan provided for: significant bill reductions and efficient investment to mitigate the impact of climate challenges such as flooding in the north east and drought resilience in the south east. Chief executive Heidi Mottram CBE said: “Our assessment of the PR19 FD is that it is contrary to the long term best interests of our customers and doesn’t provide for sustainable investment going forward, to the detriment of all our stakeholders.”

Bristol’s concerns appear to be primarily about financing issues, though full details are yet to emerge. Chief executive Mel Karam said: “ Although there is a lot we agree with Ofwat on, there are some technical issues, mainly around how to finance our company, that we don’t agree with.”

The CMA said Kip Meek will chair an Inquiry group of independent panel members to review the determinations that are referred. Meek commented: “Everyone needs water, so it’s really important that customers’ bills are not set too high, but at the same time the water companies have enough money to deliver an efficient and high-quality service. The CMA will look closely at whether Ofwat’s decision strikes the right balance in this and other areas and will make changes if not.”

All other water companies accepted their FDs, some straightforwardly, others with comments about their reluctance and the harshness of the determination.