RCV reconciliation for 2024-25: Southern benefits from Ofwat’s error correction

Ofwat has published its consultation on the Blind Year Reconciliation for 2024-2025. This sets out its proposed adjustments to the revenues and Regulatory Capital Values (RCVs) of the companies now that it has details of actual performance for 2024-2025.

These adjustments reflect the difference between Ofwat’s and the companies’ assumptions on how 2024-2025 would outturn. This is a normal regulatory process as the PR24 final determination was published before the financial year had completed. The process also allows Ofwat to correct what it calls its “unambiguous errors”. The consultation also sets out whether the adjustments will be made ‘in period’ (applied during 2025-30) or as part of the 2029 price review process (applied over 2030-35).

All companies have seen adjustments but obviously those that are currently asking the Competition and Markets Authority for redeterminations may end up with different outcomes.

Southern Water is a key beneficiary of the fresh look as Ofwat now assumes a £365.8m RCV upwards revision for 2024-2025, compared to both its final determination view and that of the company itself. This will add an extra £352.2m, representing 4.7% of Southern Water’s assumed RCV of c£7.45bn as of March 2025, net of other adjustments.