Ofwat will not ‘hand-hold’ water firms through PR19

Ofwat will not hand-hold water companies through the next price review – PR19 – and will be “raising the bar” on the quality of their business plans.

The regulator’s chief executive Cathryn Ross said that, during the last price review – PR14 – companies achieved a lot, but there was “rather more iteration and hand-holding than we had initially expected”.

Speaking at the Moody’s UK Water Sector conference in London, Ross told delegates this was “the right thing to do”, but is not something the regulator plans to repeat in PR19. She said Ofwat would be asking companies to “take ownership of their plans to a much greater extent”.

“In PR19, we will be simultaneously raising the bar on the quality of plans and reducing the extent to which, during the review, we help companies to get over that bar,” she added. “We are moving from four separate price controls in PR14 to six.

“And while we expect this will enable us to take a more targeted approach to our regulation from 2025, it means we have a lot to do in PR19 and we have a lower budget to do it. So we will need to take a more focussed approach in deploying our resources.

“It is also entirely in line with companies taking ownership of their plans, and companies and their investors bearing the risk associated with the quality of those plans.”

In the same speech, Ross said the cost-benefit review of household competition, which Ofwat was asked by the government to carry out, had “left her feeling as though we have a long way to go” on “genuinely excellent” customer service in the sector.

“The sector has done a great job over past couple of decades at improving operational levels of customer service, in terms of supply interruptions, sewer flooding, water quality and environmental improvements,” she said. “And it has done a lot to improve on the hygiene factors of the customer experience, for example in terms of responding to enquiries and complaints.

“The regulatory regime in the past has, understandably and quite rightly, focused on getting the basics right, and companies have responded.

“But … if you look at the sort of innovation in services and customer experience that have happened and continue to happen in competitive markets, I think we – all of us, Ofwat and companies – should be looking for more stretch here, and a more dynamic approach.”