Ofwat seeks energy bill details to assess calls for a base cost adjustment

Ofwat has requested water companies provide a detailed breakdown of energy costs as part of their draft business plan submissions on 2 October.

This includes the energy prices actually paid by companies, the hedging strategies companies have in place at the current time, and future energy prices companies expect to pay.

Ofwat explained this followed arguments from some firms that it should make an industry wide adjustment to base cost models to capture recent and forecast energy price hikes. However, it argued that hedging, self generation and long term off take contracts have meant water companies have on average paid far less than the wholesale price of energy, and therefore that an adjustment based on wholesale prices could “significantly overstate” energy costs to be incurred by firms in 2025-30.

The detailed information will support further analysis of the issue.