Utility Week

UTILITY WEEK | 20TH - 26TH SEPTEMBER 2019 | 17 Policy & Regulation Hafren Dyfrdwy Category: signi cant scrutiny Hafren Dyfrdwy said it was pleased with its response from the regulator and said there were "no signi cant material issues remain- ing". Its arguments, it said, were key to the nancial resilience of the company. It queried Ofwat's weighted average cost of capital (Wacc) calculations as well as the base point reduction (bps) of 37, which it said would bring it to one notch above Moody's sub-investment grade and for wholesale it would be graded as sub-investment. It also argued that targets for reducing supply interruptions were more challenging than for other companies and called for the reintroduction of the penalty collar. And it said it was the only company to have a penalty-only measure for leakage tar- gets, which in the dra„ determination was increased by 4,000 per cent with no option to earn rewards from outperformance. Northumbrian Water Category: slow track Northumbrian said it was unable to provide assurance that the dra„ determination was nanceable and indicated that it was "not acceptable". In its revised submission it reduced totex by £92 million, which narrowed the gap between its view of eŒ cient costs and Ofwat's to £204 million. It said this gap related to areas of spending it believes are "beyond the scope of further reductions". Northumbrian was not the only company to query Ofwat's upper quartile benchmark- ing approach to cost reductions. It ques- tioned the viability that any company could achieve upper quartile pricing combined with upper quartile levels of eŒ ciency for quality and service. The company brought in an independent expert to review the pricing, which found the overall package to be not nanceable. Portsmouth Water Category: slow track Portsmouth said the dra„ determination was nanceable, albeit with the "not immaterial challenges" Ofwat had presented. Ultimate nanceability, however, depended on capi- tal project costs, speci cally delivery of the Havant Thicket Winter Storage Reservoir, which Portsmouth says is central to its plans. South East Water Category: slow track South East called Ofwat's targets something "no company can achieve". It found the cost assessment to be a "major area of concern". PROPOSED BILL REDUCTIONS BETWEEN NOW AND 2025 Water and sewerage company Percentage change between 2019/20 bill and 2024/25 bill Anglian 12% Dwr Cymru 14% Hafren Dyfrdwy 2% Northumbrian 26% *Severn Trent 5% *South West 14% Southern 14% *United Utilities 11% Thames 10% Wessex 15% Yorkshire 10% Water-only company Percentage change between 2019/20 bill and 2024/25 bill Affi nity 12% Bristol 16% Portsmouth 12% SES 15% South East 10% South Staffs 17% * Fast-tracked companies continued overleaf Thames Water Northumbrian Water Yorkshire Water Anglian Water Dwr Cymru South West Water Southern Water (area shown is for water and wastewater supply) United Utilities Wessex Water Severn Trent -12% -14% -14% -15 -14% -10% -5% -11% -10% -26% The difference between what the ten WASCs have asked for and what Ofwat has proposed in its draft determinations WASCs

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