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Ofwat defends water model


WATER REGULATOR Ofwat this week hit back at water company claims that its cost evaluation model for capital projects is flawed.

'We disagree that the model is flawed; it has stood the test of time, ' Ofwat director of costs and performance and chief engineer Bill Emery told NCE.

He said that the Monopolies & Mergers Commission and the Competition Commission had both found the model to be a sound way of assessing the cost of capital schemes.

Last week water companies criticised the model for being unreliable. They claimed that it was jeopardising hundreds of millions of pounds worth of planned projects (News last week).

Every five years, Ofwat asks water companies to price 100 standardised capital projects to help it determine water company prices for the following five years. These estimates are used to value future projects proposed by companies.

From this the most efficient companies are identified and their costs used as benchmarks for the other water companies.

Emery rubbished claims that this model favoured companies that build low capital expenditure projects which cost more to operate.

Operating costs are not taken into account in the Ofwat model, he said, but are during the price review process.

Emery also maintained that there was still scope for companies to carry out their capital projects more efficiently. 'Even the best companies can make some improvements. Every year they get a little bit more efficient, ' he said.

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