Ofwat has confirmed it will make in-period Outcome Delivery Incentive (ODI) determinations in relation to performance for the 2020-21 reporting year with the exception of in-period per capita (PCC) consumption performance commitments, unless it is otherwise requested to do so. It added there would be a “high bar” for other ODI or Performance Commitment (PC) adjustments, particularly if industry comparisons indicate scope for effective delivery.
In Information Note, Expectations for monopoly company annual performance reporting 2020-21, Ofwat reiterated an explanation in a March letter that, in light of Covid impacts, it would delay decisions on PCC incentives until PR24. “Our decision for each company at that point would take account of how well companies have risen to the challenges of promoting water efficiency and considering any implications for long-term planning.” In the meantime, it said companies should continue to report each year against the PC level set out in the final determination, and what the expected financial payments associated with this would be.
Ofwat invited firms to explain in their 2020/21 Annual Performance Reports how they have worked to deal with Covid impacts more widely, including any influence on their performance, and to make a case for intervention if they consider an impact has been material. It referenced a few areas specifically, including:
• the Environment Agency’s six month extension to year one WINEP delivery dates and decision not to produce a bathing water quality assessment for 2020;
• use of the Covid vacant flag for businesses between April and August 2020 and the impact on PCs incentivising the reduction of business void properties; and
• bad debt – Ofwat welcomed commentary on the impact on bad debt charges, management costs, levels of provision, cash collection rates and actions companies are taking to manage these impacts efficiently for their customers.
Elsewhere in the note, Ofwat outlined the reasons for and changes to how it would like companies to report on their greenhouse gas emissions for 2020-21. It proposed adopting a voluntary approach to begin with, with the intention for reporting to become standardised and mandatory in future, in relation to both operational and embedded emissions.
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