Portsmouth hits back at ‘inference of overcharging’

Portsmouth Water has expressed its disappointment at what it sees as Ofwat’s inference it overcharged household customers during the last AMP cycle by £3 per year – something it says is “patently not the case”.

The company accepted what it called an “extremely challenging settlement for the business” in its final determination, which it noted represents good value for customers.

Wessex, Southern, SES and Thames each aired their concerns of the impact to their business of accepting the final determination. Four companies requested a referral to the Competition and Markets Authority after rejecting Ofwat’s final determination.

In a letter to Ofwat, Portsmouth stated its “disappointment” with the regulator’s assessment of the wholesale revenue forecasting incentive mechanism (WRFIM) adjustment.

In relation to performance penalties, the company’s board noted it had “demonstrated unambiguously” that the forecast and actual revenue for connection charges was within 5 per cent of its PR14 forecast and found the revenue penalty of £4.4 million “totally disproportionate and unfair”.

In the letter, chief executive, Bob Taylor, said: “The inference of the decision is that we have overcharged our household customers in AMP6 by £3 per household per year; this is patently not the case. We have taken the decision to accept the Final Determination on the understanding that the WRFIM matter will be considered separately outside of the ‘swings and roundabouts’ of the Final Determination.”

The company said its acceptance of the determination in the round was largely due to engagement with Ofwat since the draft determinations in relation to its Havant Thicket reservoir project.

The letter went on to note areas of concern by Portsmouth’s board including a cap on the wholesale totex efficiency for performing above the benchmark; the unrealistic PCC reduction target of 6.3 per cent; and retail cost assessment will be loss-making throughout AMP7.