Ofwat identifies its key concerns with companies’ long-term delivery strategies

What base buys, how low-regret investment is identified and how companies are catering for a wide range of possible futures have emerged as Ofwat’s key concerns with the Long-Term Delivery Strategies (LTDS) water companies are producing for PR24.

In a letter to regulatory directors following development meetings with all companies, Ofwat welcomed companies’ work on the the LTDS, to set out a 25 year view of resilience and outcomes delivery. It identified the following areas as its biggest concerns:

• delivering improvements from base expenditure – some companies are not sufficiently challenging themselves to deliver stretching levels of performance from their base allowance, in the short and long term;

• core and alternative pathways – some companies need to do more to identify low-regret investment in line with Ofwat’s definition, establishing where activities are needed now, and where decisions can be scheduled later in the timeline; and

• scenario testing – companies should ensure their strategy is robust to a wide range of futures, including applying the common reference scenarios for technology and abstraction reductions in line with guidance, alongside other common and company-specific scenarios.