Ofwat consults on shifting per capita consumption incentives to 2025

Ofwat is consulting until 6 September on moving the in-period Outcome Delivery Incentives for per capita consumption all water companies (except South West Water) have as part of their PR19 settlement to the end of the price control period. This is in light of unanticipated changes in consumption patterns, and in particular the increase in household consumption, which have resulted from Covid restrictions and resulting lifestyle changes.

Ofwat insisted that “it important that companies retain the strongest incentives possible for managing household demand” and so rather than water down the incentives, plans to make decisions on ODI payments during the 2024 price review. The regulator commented: “When deciding on ODI payments due for performance during 2020-25, we would take account of the impact of Covid-19; specific steps taken by companies during the price control period to reduce household demand for water; and the extent to which the need to recover any remaining shortfall has been incorporated into their proposals made at the 2024 price review.”

Ofwat added: “In the meantime, we would continue to expect companies to report against their annual targets. Moving decision making on ODI payments to the 2024 price review should not lead to a delay or easing in demand reduction activities now or in the remainder of the period. Companies should use this valuable opportunity for the sector to identify what more can be done and take collaborative and sustained action to deliver.”