Ofwat finalises Havant Thicket guidance and modifies Portsmouth and Southern licences

Last week, Ofwat modified Portsmouth Water and Southern Water’s licence conditions to facilitate the development, construction and operation of the Havant Thicket reservoir, and published the final guidance on the regulatory framework for the reservoir.

The licence changes are designed to ensure that both companies comply in all material respects with the 80-year Bulk Supply Agreement that they have entered into for Portsmouth to trade up to 21Ml/d with Southern. Ofwat will now be able to intervene if either party fails to comply with the Agreement as that failure will also be a breach of licence conditions.

The regulatory guidance covers: the recovery of efficient costs over the life of the project; the treatment of the bulk supply agreement should either party enter into special administration; and regulatory treatment of the Outcome Delivery Incentives associated with timely delivery.

Ofwat commented: “As this approach is one of a kind, we have developed a bespoke regulatory framework in order to protect customers and provide necessary clarity to companies and investors regarding the remuneration of the project to ensure project efficiency and financeability. The guidance should therefore not be seen as setting a precedent for other projects whether or not those projects have some similar characteristics.”