Ofwat consults on "significant evolution" in price control reconciliations policy

Ofwat is consulting until 29 April on its proposed approach to the reconciliations that will be required during, and at the end of, the 2020-25 price control period, to adjust the amount of money water companies receive.

The regulator said the approach is “a significant evolution of our approach at the 2014 price review reflecting a further development in how we undertake reconciliations”. It features more in-period reconciliations and additional reconciliations “to ensure companies’ allowed revenues are appropriate”.

David Black, senior director at Ofwat (pictured) said: “Our approach to this reconciliation process marks a significant evolution of our approach at the 2014 price review because it brings together a broader range of issues such as how we propose to treat issues like tax, inflation and value for money.

“The reconciliations form an important part of how we regulate water companies and we expect them to incentivise companies to collect the right amount of revenue; result in reduced bill volatility; and deliver on, and potentially exceed the stretching performance commitments.”

The reconciliation rulebook will be finalised Autumn. In the 2019 price review, reconciliations resulted in a net revenue adjustment of more than £1.8bn.