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Water firms 'surprised' and 'disappointed' by regulator

Water pipe

Water firms have expessed surprise and disappointment at regulator Ofwat’s decision to knock back funding plans due to run between 2020 and 2025.

Of the 17 water companies to submit plans for the AMP7 spending period, only three – Severn Trent, South West Water and United Utilities – got the green light from the water regulator in its initial assement.  

The remaining 14 firms were told to go back to the drawing board and rework their plans. Of those, Affinity Water, Hafren Dyfrdwy, Thames Water and Southern Water were flagged as “having the most work to do” to meet targets set out by the regulator.   

Affinity Water chief executive Pauline Walsh said she was “surprised” by the ruling from Ofwat.  

“We are surprised and disappointed by Ofwat’s initial assessment of our 2020-2025 Business Plan and look forward to discussing this with Ofwat in the coming weeks as part of this on-going process,” she said. “So far in this regulatory period, we have reduced the amount of water we take from the environment by 42M.l a day and we have committed to the largest percentage leakage reduction (14%) of any water company in England and Wales.” 

Thames Water was similarly disappointed with the criticism from Ofwat. Chief executive Steve Robertson said Thames’ plan prioritises investment “over everything else”.  

“Thames Water is disappointed with today’s announcement from Ofwat on our £11.7bn five-year business plan, which is built on the feedback of nearly 1M customers,” he said. “We remain committed to our forward-looking plan, which prioritises investment over everything else - including shareholder dividends.”  

He added: “The plan includes significantly increased investment, to tackle issues that really matter to customers such as leakage, pollutions and resilience, while keeping average bills flat.”  

Consultant Black & Veatch head of strategic business consulting Keith Gardner said Ofwat’s decision showed there was a need for a “step change from the industry.” 

“Broadly speaking, there is a need for a step change in performance from the sector, with a particular focus on leak reduction,” Gardiner said. 

”Ofwat has certinaly challenged the poor performers and a key element going forward will be innovation to deliver leakage reduction in new ways, for less.” 

However, plans from South West Water, United Utilities and Severn Trent were praised for their “high standard” by Ofwat cheif executive Rachel Fletcher. 

In response South West Water managing director Stephen Bird said: “We’re encouraged that the regulator has a high regard for our business plan, particularly as it was shaped by our biggest ever consultation with customers. We are very grateful for the feedback we received.” 

United Utilities chief executive Steve Mogford was equally pleased to get the immediate go-ahead from Ofwat.  

“We are pleased that our plan, which offers improved service and lower bills for customers, has been awarded fast track status,” Mogford said.  

“We look forward to working constructively with Ofwat through to publication of the draft determination which, in line with the price review timetable for fast track companies, we expect to be published by Ofwat in early April 2019.” 

Ofwat will return its final determination of business plans in December this year. However, companies categorised as needing “significant scrutiny” or being “slow track” must submit revised plans by April. 

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