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Ofwat sets out its approach to 2009 price review

Ofwat today published its guidance for companies on how it will go about setting price limits for customers' water and sewerage bills for five years from 2010-15.

The guidance takes account of responses to its consultation paper published last October.

Ofwat Chief Executive Regina Finn said: "We are setting price limits at a time when the water sector is facing demanding challenges, including climate change, population growth and rising energy costs.

"Companies will need to be innovative and creative if they are to meet these challenges while delivering water and sewerage services at prices that customers regard as fair.

"At present our price limits are set for these monopoly businesses to protect customers who cannot choose their supplier. But we are moving towards an approach that promotes real competition and this might include setting separate price limits for different parts of the water and sewerage businesses in the future."

The regulator will be seeking to set price limits that take account of the long-term needs of consumers, and the pressures on the water sector.

The process will include a new form of incentive-based regulation for capital expenditure that encourages each company to submit a realistic business plan.

"We asked companies to develop and publish 25-year strategic direction statements, encouraging them to set out how they plan to meet their customers' long-term needs.

"This innovation will help each company to develop a business plan that will safeguard high-quality sustainable services for its customers today and for future generations," said Finn.

The next step in the 2009 price review process will be for each company to submit a draft business plan to Ofwat by 11 August 2008.

Download a copy of the document at the foot of this page.

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