Utility Week

12 | 5TH - 11TH APRIL 2019 | UTILITY WEEK Policy & Regulation Analysis I n January, Ofwat published its initial con- clusions on the PR19 business plans sub- mitted by water companies in England and Wales. Yet despite 30 years in the private sector and some £150 billion of investment, Ofwat's marking of the ten privatised water authorities (as was) and their smaller water- only brethren was unremittingly harsh. In incentivising companies to compile credible business plans, Ofwat had offered various regulatory and financial benefits for those rated in the top two categories of "exceptional" and "fast-track". Unsurprisingly, no company qualified for the elusive excellent category. Winners emerge Each company was awarded marks – from A to D – under nine test areas. Since the origi- nal ten big water and sewerage companies (WASCs) became 11 with the formation of Hafren Dyfrdwy, there was a potential 99 As up for grabs by the WASCs. In the event, just three As were awarded – a dreadful sector return. And there were 16 Ds, three each were allocated to Thames and Southern. Indeed, if A levels were marked as rig- orously, UK universities would have few students. But three comparative winners emerged in the form of United Utilities, Sev- ern Trent and South West Water. They were awarded "fast track" status, and United Utili- ties seemingly came top. UU's success came as a surprise, although both Severn Trent and South West Water had been tipped – not least by Utility Week – to do well. Ofwat concluded that United Utilities' submission was "an ambitious, innovative and high-quality approach to addressing affordability and vulnerability" There were five companies in the position beloved by regulated utilities – the middle of the pack. Stuck in the middle Anglian was criticised for its high cost base – its wholesale clean water figure was 32 per cent above Ofwat's benchmark; the com- parable wastewater figure was 19 per cent above it. Anglian collected a second D under the "Securing Confidence and Assurance" cat- egory, with Ofwat giving the thumbs down to some of its financial proposals, including its dividend policy. Both Yorkshire and Northumbrian man- aged to keep a D off their cards, although neither managed to secure an A rating. Making the grade? As most water companies resubmit their PR19 business plans, they will be hoping for a better report from Ofwat's Rachel Fletcher, who said in January that they 'must try harder', writes Nigel Hawkins. TEST AREA GRADES Source: Ofwat Testarea Waterandseweragecompanies Water-onlycompanies AnglianWater DwrCymru HafrenDyfrdwy NorthumbrianWater SevernTrentWater SouthWestWater SouthernWater ThamesWater UnitedUtilitiesWater WessexWater YorkshireWater AffinityWater BristolWater PortsmouthWater SouthEastWater SouthStaffsWater SESWater Engagingcustomers Addressingaffordabilityand vulnerability Deliveringoutcomesfor customers Securinglong-termresilience Targetedcontrols,markets andinnovation Securingcostefficiency Aligningriskandreturn Accountingforpastdelivery Securingconfidenceand assurance A A A B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B D D D D D D D D D D D D D D D D D D D D D D D C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C

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