Utility Week

UTILITY WEEK | 8TH - 14TH FEBRUARY 2019 | 15 Policy & Regulation PR19 initial assessment of plans: Summary of test area assessment Test area Water and sewerage companies Water only companies Anglian Dŵr Cymru Hafren Dyfrdwy Northumbrian Severn Trent South West Southern Thames Water United Utilities Wessex Yorkshire Water Affinity Bristol Portsmouth South East South Staffs SES Engaging customers A B C B B B C C B B B C B C C B C Addressing affordability and vulnerability B B D B B B B C A B C C C C B C B Delivering outcomes for customers B C D C C B C C C C C C C C B C C Securing long-term C C D C C B D D B C C D C C C D C Targeted controls, markets and innovation B C C C C C C C B B B C C C B C C Securing cost efficiency D D B C B B D D B C C C C B C C D Aligning risk and return C C D B C B C C C D C D C C C C C Accounting for past delivery B C D C B D D D B B B C D C D B B Securing confidence and assurance D A C C B C C C B C C C C C B C D resilience Total (aggregated) costs Business Our Cost plans (£m) view (£m) challenge (%) Anglian Water 6,752 5,494 18.6% Hafren Dyfrdwy 158 163 -3.1% Northumbrian Water 3,247 2,825 13.0% United Utilities 5,998 5,799 3.3% Southern Water 4,161 3,433 17.5% Severn Trent Water 6,594 6,393 3.1% South West Water 2,049 1,982 3.3% Thames Water 11,738 9,421 19.7% Dwr Cymru 3.505 2,866 18.2% Wessex Water 2,408 2,121 11.9% Yorkshire Water 5,255 4,453 15.2% Affinity Water 1,608 1,433 10.9% Bristol Water 515 449 12.9% Portsmouth Water 248 254 -2.5% South East Water 296 242 18.1% South Staffs Water 1,087 904 16.8% SES Water 660 558 15.5% Industry 26,646 56,279 48,789 13.4% Cost efficiency Ofwat appears to have placed a large weighting on cost efficiency. This came as a surprise to some analysts in the industry, who expected more of a focus to be placed on other measures such as resilience and cus- tomer engagement. In their PR19 business plans, the regulator says, companies forecast a total expenditure of £56.3 billion for the period 2020-21 to 2024-25. That is an increase of 11.4 per cent relative to the expected actual expenditure for the previous period. The regulator has challenged all but two of the companies – Hafren Dyfrdwy and Portsmouth – to cut their costs by at least 3 per cent. Notably, the three companies placed in the fast-track category all received a B for cost efficiency and have been challenged to cut costs by significantly less than others in the sector. HOW WATER COMPANIES FARED TOTAL (AGGREGATED) COSTS Source: Ofwat TEST AREA GRADES Source: Ofwat UTILITY WEEK PREDICTIONS FROM DECEMBER 2017 Water and sewerage Exceptional Fast track Slow track Significant scrutiny Anglian Northumbrian Severn Trent Southern South West Thames United Wessex Yorkshire Welsh Water Water only Exceptional Fast track Slow track Significant scrutiny Affinity Bristol Portsmouth South East South Staffs Sutton & East Surrey Key More likely Less likely Tables represent the aggregated views of six water industry experts polled by Utility Week on companies' likely categorisation

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