Market-led cost of capital could save households £20 a year consumer watchdog argues

Ofwat could save customers £20 per household, per year if it reconsiders its early view of the cost of capital for PR24, according to research commissioned by CCW.

MCC Economics undertook a review of Ofwat’s proposals for the weighted average cost of capital to apply from 2025 onwards, including the overall allowance, cross checks, debt and financing assumptions, and equity assumptions including the risk-free rate, total market return and equity beta.

It found 24 signals that the true cost of capital is lower than Ofwat’s ‘early view’ and said a ‘market-led’ view could save customers £2.6bn over five years.