Standard content for Members only
To continue reading this article, please login to your Utility Week account, Start 14 day trial or Become a member.
If your organisation already has a corporate membership and you haven’t activated it simply follow the register link below. Check here.
Ofwat has written to Thames Water, Bristol Water and United Utilities to warn them that their bids for AMP6 exceed Ofwat’s own calculations of their costs by a total of £1.3bn.
The regulator’s concerns, announced to the Stock Exchange this morning, are focused on Bristol Water’s wholesale water price control, the proposed separate price control for Thames’s costs relating to the Thames Tideway Tunnel, and United Utilities’ wholesale wastewater price control. In each case, the company’s bid is more than one-fifth higher than Ofwat’s projected efficient costs.
The ‘gaps’ between the companies’ projections and Ofwat’s are: Bristol Water – Water, £203m (57%); Thames Water – Thames Tideway Tunnel costs, £331m (102%); United Utilities – wastewater , £769m (29%).
For Thames the concerns centre on how contingencies and risk have been included in Thames’s part of the Tideway Tunnel work and how they are being managed within the new proposed price control framework.
Ofwat said this early warning would give the three companies time to alter their plans or provide more compelling evidence to back them up. It suggested they may wish to go back to their customer challenge groups and other regulators.
A Thames Water spokesman: “It is helpful that Ofwat have raised these questions with us at this stage of the ongoing price review process and we will respond in due course.”
Bristol Water said in a statement: “We appreciate the feedback from Ofwat and we will be seeking clarity on the wholesale cost assessment which Ofwat has carried out, in order to consider what additional information we can provide to the regulator and what changes we need to make to our business plan.”
Ofwat will issue draft determinations for all relevant water and wastewater companies (including these three) as planned on 29 August 2014. The companies and other stakeholders will have until 3 October 2014 to comment, ahead of final determinations in December.
A spokesperson for United Utilities declined to comment.
Please login or Register to leave a comment.