UU cuts planned totex by £370m in draft determination response

United Utilities (UU) has cut its planned PR14 totex by £370 million in its response to Ofwat’s draft determination.

UU has proposed cutting the totex gap between its initial submission and the regulator’s draft determination – which was published in August – from £1 billion to £630 million.

This includes scaling back around £90 million of activity associated with the 2020-25 early start projects under the National Environment Programme (NEP5) and trunk mains resilience activity.

The remaining £280 million of the proposed reduction is said to come from cost efficiencies, bringing UU’s overall wholesale totex for 2015-20 down from £5.89 billion in June’s initial business plan, to £5.52 billion.

There still remains a £628 million totex gap between UU’s revised business plan and the Ofwat’s draft determination, to which the water company has provided “a comprehensive response comprising further independent evidence and information” to support the need for these costs to be included in their final determination.

The revisions will see customer bills fall by 4.1 per cent in real terms over the PR14 period, which is compared to a 2.3 per cent reduction in UU’s June business plan.

Changes have also been made to the proposed Outcome Delivery Incentives (ODIs) for wastewater performance with UU suggesting the total reward incentive is reduced to around £60 million (from £100 million in the June plan) and the penalty risk increased from £190 million to around £250 million.

Friday (3 October) was the deadline for representations to be made to Ofwat following the publications of the draft determinations in August.

The regulator will now assess all the responses and publish its final determinations for the 2015-20 period on 12 December.