PR19 is at ‘point of maximum tension’

Ofwat’s Rachel Fletcher has admitted that the PR19 discussions are at a “point of maximum tension”.

The regulator’s chief executive told last week’s Utility Week Congress that its disagreements with water companies over their business plans for the next five years had now been clearly laid out and that constructive discussions were ongoing.

She welcomed the willingness of water company bosses to put forward ambitious sustainability plans and to incorporate more public interest commitments. However, she stressed that this needed to be brought together into a unified campaign that could be communicated to the public.

Fletcher said: “We are between draft and final determinations, which are due on 11 December. We are understandably at a point of maximum tension where the disagreements between us have been quite well laid out.

“On performance, by and large the water industry is accepting the challenge to make a significant step change across the full gamut of performance.

“The debate is now about the path to get where we all feel we need to be and whether the cost allowances we have put out are achievable.

“That is a natural place for us to be.”

These negotiations were always going to be points of friction, Fletcher insisted, adding: “Ofwat signalled over two years ago that PR19 was going to set stretching targets and that we expected companies to increase their efficiency and that companies needed to make sure they were properly shored up for a tougher determination.

She went on to say that Ofwat wanted to see the good collaboration taking place around infrastructure needs brought to bear on other challenges, not least the ecological status of the country’s rivers.

She said: “We have got a number of CEOs now saying we need to think about how we benefit the environment. The public interest commitments that the industry has set out shows an industry really challenging itself.

“The commitment on net-zero by 2030 makes it the first industry to do that. But there are four other commitments – around plastics, leakage, water poverty and social inclusion – that are also important.

“We have got a massive amount of ambition and companies recognising they are about more than just giving a good service at a decent price and making a good return for their shareholders. What we need to do over the next few years is get from good words into some really impressive action.”

Meanwhile, Bristol Water chief executive Mel Karam told Congress that resilience decisions needed to be taken over a much longer timeframe than the five-year regulatory periods.

He said: “The longer-term resilience we need, in terms of balancing water supplies and wider environmental work, cannot be planned over a five-year period. We have to take a longer term view and we have to have lots more discussion.”

He said promising signs of this forward thinking and partnership were evident in the sector’s commitment to achieve net-zero emissions by 2030.

He said: “That is very ambitious, you might even call it audacious. We know there is a lot of risk that we won’t hit that target but we are doing everything we can to get there. There are a lot of initiatives going on and they are all about co-ordinating across the industry and outside.”