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The four water companies appealing to the Competition & Markets Authority have submitted their grounds for requesting a redetermination. As part of a short series Utility Week will explore each of their Statements of Case and the reasons for not accepting Ofwat’s final determinations. In this piece, we examine the arguments from Anglian.
Troubled times highlight the need for resilience more than ever and Anglian Water emphasised the need for adequate investment to develop that resilience in this AMP cycle instead of “kicking the can down the road”.
The company asked the CMA to consider if Ofwat had balanced the need for bill reductions with investment. The company asked for more money for future resilience of supply but Ofwat challenged Anglian to find greater efficiencies without expecting customers to pay more.
“It has never been clearer that a resilient water industry able to absorb shocks and stresses is crucial to the UK economy,” chief executive Peter Simpson said. “That resilience can only be adequately delivered when we plan, invest, and don’t kick problems down the road – particularly when we know that the future is ever more uncertain and volatile.”
Anglian has continually cited the extensive customer engagement it undertook when writing its business plan; it stood firmly by this and refused Ofwat’s revisions to the plan that went against expressed customer wishes.
The company highlighted its track record as a strong player in the industry, including the move to enshrine public interest into the heart of the company by changing its Articles of Association. The customer-centric focus of the company’s statement illustrates its dedication to complying with customer wishes, it stressed.
“With every passing month the impacts of a changing climate and a growing population become clearer,” Simpson said. “Our customers were clear – they expect us to invest now to deal with these challenges, not wait until they become more expensive to deal with. Our plan offered that, while also reducing bills.”
The company argued its proposed bill reduction of 1 per cent came after a decade of bill cuts including 10 per cent drop in the past five years. It pointed out that bills in the wider industry have risen by c.46 per cent since privatisation, while Anglian customers have seen just 10 per cent rise since 1989.
Ofwat’s final determination included a 10 per cent bill cut and allowed expenditure of £5.71 billion for the five years to 2025 – £750 million less than the company requested.
The company argued that Ofwat’s underfunding in its final determination limited the ability for enhancement expenditure and for growth.
The Statement of Case argued Anglian would be unable to properly finance its functions; to maintain and enhance services to customers or to maintain the health of network assets.
The geographic makeup of Anglian’s east of England region includes more agricultural land than other water company catchments, features slow moving rivers and experiences lower rainfall than other areas. The company set up Water Resources East 2014 to manage the water needs and interests of all stakeholders. It said the determination handed to it by Ofwat would not allow it to ensure the region is resilient to increased risks of drought and flooding.
Another regional concern in the plan is allowing for new housing developments. Tens of thousands of new homes are to be added between Oxford and Cambridge – adding further pressure to the area’s water resources.
It argued that insufficient spending allowance would prevent it from driving down leakage to meet targets set by both Ofwat and industry-wide Public Interest Commitments to cut leakage by 30 per cent by 2030.
The company maintained that properly funded investment over the next five years would give resilience and protect future billpayers from avoidable bill hikes. Meanwhile it said enacting the plan on Ofwat’s terms would give lower-cost short-term solutions only, which would need further investment in the future.
Anglian said it wanted to ensure that future customers do not pay more than they should because opportunities to address these challenges were not taken as part of PR19.
Simpson’s company advocated investment now rather than wait for the problems to worsen and forcing greater financial burdens on the company and its customers in the future.
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