Ofwat pushes back on firms and third parties for “mischaracterisation”

Ofwat called out where it believes it has been “significantly mischaracterised by the disputing companies and third parties” in there representations to the Competition and Markets Authority (CMA). The regulator's response came in a raft of new documents submitted to the CMA in June but published on the Ofwat site last week.

The six new papers (one for each disputing company specifically, plus a paper on cross cutting issues and another on risk and return) responded to the latest (May) submissions from Anglian, Yorkshire, Northumbrian and Bristol Water. While running to almost 200 pages together, Ofwat said it had concentrated on responding to new points raised by the firms, and identifying mischaracterisation, given “the CMA is already burdened with an extremely large volume of submissions and materials in these redeterminations”.

The cross-cutting issues included: base cost models; the catch-up efficiency challenge; the application of frontier shift to the Water Industry National Environment Programme costs; the application of frontier shift to metering costs; costs related to the Industrial Emissions Directive; the overall level of stretch on costs and outcomes; and the impact of Covid 19 on the determinations.

Another paper dealt with the balance of risk and return; the allowed return; financeability; and the gearing outperformance sharing mechanism and actual company structures.

Ofwat said: “Overall, having considered these new arguments, we stand by our final determinations and consider that customers should not pay more to receive less.”