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It is still too soon to fully assess the impacts of Covid-19 upon water companies’ outcome delivery incentives (ODI), Ofwat has said whilst delivering its provisional determinations for in-period adjustments for 2020/21.
The regulator has set out in-period ODI payments based on each company’s performance in the first year of AMP7 after any interventions are taken.
Fast-tracked Severn Trent is set to earn the highest ODI performance payment while Southern is forecast to incur the highest penalty.
Ofwat said it is not yet in a position to make a rounded and balanced assessment across all of the issues and added that how well companies perform against ODIs “is only part of the picture”.
The regulator noted the overall impact of the coronavirus on the water sector is still evolving and may not, in the round, have a materially high impact at either the sector or company level. It praised the “great public service spirit” that companies and their employees have shown during the pandemic.
In March and July 2020, Ofwat’s then-chief executive Rachel Fletcher wrote to water companies to say any changes to ODIs would not be re-evaluated until the full impact of the pandemic was understood.
Fletcher stressed that companies should do the right thing for their customers regardless of regulatory frameworks or incentives.
These included educational sessions that could not take place in-person due to social distancing rules. Many companies responded by offering on-line lessons and offering home-learning materials for school children. Ofwat said some companies were able to meet their commitments by adapting their offerings, but some activities had not provided the same quality of education.
Thames Water fell short of a bespoke ODI to generate renewable energy from its wastewater treatment works that had lower flow due to altered consumption patterns in lockdown.
Where the Environment Agency failed to collect sufficient samples to classify bathing water quality for Anglian, Northumbrian, Southern, South West and Yorkshire, the performance will be set as non-applicable with no financial impact.
Earlier this year Ofwat proposed deferring valuations of ODI payments for per capita consumption (PCC) targets until the end of the 2020/25 period. Ofwat said it wants to see companies redoubling their efforts to manage demand and will decide whether or not to intervene based on efforts to drive water efficiency.
Ofwat will consider representations from all stakeholders on the draft determinations until 21 October ahead of publishing its final decisions by 15 November.
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