Ofwat confirms its guidance on long-term strategies for PR24

Following its November 2021 discussion paper, Ofwat has published its final guidance on long-term delivery strategies at PR24. These aim to set business plans for the next price review in the context of a 25 year strategy.

According to the guidance, the strategies should:

• consist of five main parts: ambition, strategy, rationale, foundation and board assurance;

• use adaptive pathways, featuring a core pathway and alternative pathways (how many is left to the company to decide) with decision points identified – all key enhancement activities should be set out in terms of adaptive pathways;

• feature scenario testing.

Companies should test the whole of their enhancement investment strategy against the sector wide common reference scenarios, which feature two parameters for four material drivers of uncertainty around future enhancement spending: climate change, technology, demand and abstraction reductions. In addition, wider scenario testing beyond the common reference scenarios should be used.