PR14 was “transformative”, Ofwat review finds

Ofwat has published for discussion its view that the approach it took at PR14 was “transformative” including in driving culture change across the sector, “with companies significantly sharpening their focus on customers and the environment”.

The regulator’s review of the 2014 price review reported positives from the totex and outcomes framework that was introduced, including average bills down 5%; pollution incidents down a third; a 4% customer satisfaction increase; and abstraction at environmentally sensitive sites reduced.

The review also highlighted areas which could have been improved, including making some service levels more stretching; better calibrating some incentive rates; and focusing more strongly on environmental areas and the long term, including asset health.

Senior director, Aileen Armstrong, said: “Many of our ambitions for PR24, including to increase focus on the long term and deeper understanding of customers' views, are possible due to the outcomes framework put in place in PR14. Our vision for greater environmental and social value builds on areas such as our approach to sustainable use of water resources. And totex is an enabler for our focus on efficiency. As we did with our approach to PR19, we are continuing to build on lessons learned as we move into PR24 and beyond.”

The report focused on five key areas of change in the PR14 framework:

• the introduction of the outcomes framework which helped focus on delivery for customers;

• the approach to securing value for money for customers (including the introduction of the totex approach);

• the balance of risk and return; • sustainable use of water resources; and • the creation of separate targeted wholesale and retail controls.