Customers to bear higher share of Tideway overspend costs because of Covid hit

Ofwat is consulting until 7 May on a series of amendments to Tideway’s licence, in light of the c£200m hike in the project's cost caused by the pandemic. The increase derives from construction delays and increased costs, given work across all sites ceased between March and May 2020 and since restarting has been at a reduced rate of efficiency given Covid restrictions.

Ofwat is considering changes in cost sharing, accelerated depreciation and extending the timetable.

Altering the cost sharing rate

Under its licence, Tideway bears 40% and customers bear 60% of any overspend. Given the extensive and unanticipated impact of the pandemic, Ofwat is consulting on increasing the cost share borne by customers to 85% in respect of Covid costs incurred between mid March and 24 July 2020, and to have sole discretion to agree alternative sharing rates for the period after 24 July (though it cautioned the bar for this would be higher).

Accelerated depreciation

Ofwat is considering allowing all Covid specific expenditure from the start of the pandemic up until 30 September 2021 to depreciate over 18 years, commencing from 1 April 2022. The period was chosen as it reflected the normal depreciation period for the wastewater assets of Thames Water.

Project delay

Ofwat is minded to amend Tideway’s licence to extend the Planned System Acceptance Date of 28 February 2027 by the length of any delay caused by Covid-19 (Tideway currently puts this at six months).