Utility Week

6 | FEBRUARY 2021 | UTILITY WEEK The Month in Review CMA changes its stance on cost of capital T he Competition & Markets Authority (CMA) appears ready to shi its thinking on setting the cost of capital for the four appealing water companies' redeterminations due in mid-February. A consultation document released by the regulatory body indicated the weighted average cost of capital (Wacc) will be reduced by around 0.3 per cent compared with its provisional findings published in September. Anglian, Bristol, Northumbrian and Yorkshire water companies each rejected Ofwat's PR19 final determina- tion in February 2020 and requested referral to the CMA for their 2020-25 business plans. The CMA said it has re-evaluated and updated its thinking on the cost of debt and equity. This would impact on the Wacc, which was set controver- sially higher than Ofwat's and above what companies requested. On the cost of debt, the CMA is now suggesting an allowance of 2.12 per cent, down from the 2.45 per cent set in the provisional findings. The impact on Wacc would be a reduction of around 0.20 per cent. The cost of equity range will be updated from the provisional findings to reflect stakeholder responses. It said the point estimate for the cost of equity will be set around 0.25 per cent above the mid-point range. The CMA will consider responses to the consultation along with other evidence before setting a final figure for the cost of capital. Household bills are set to fall by 11 per cent compared with 2015-20, which is a greater reduction than in the pre- liminary findings but not as great as Ofwat's proposed bill reduction (12.5 per cent). The CMA said its approach con- trasted with that taken in its dra redetermination when it picked the bottom of the range as the estimate of the cost of embedded debt; the middle of the range as the estimate of the cost and weight of new debt; and a figure between the midpoint and the top of the range as the estimate of the cost of equity. It said it now considers the risk of setting the cost of equity too low is not as significant as it had implied in its provisional findings and said the right estimate is towards the middle of the range. Given current market conditions, the CMA considers the risk of capital exiting in AMP7 is relatively low. The consultation on the cost of equity and debt ran until 27 January, leaving a matter of weeks to finalise its redetermination as it also states it still intends to publish in mid-February. Ruth Williams, water correspondent £49m Amount energy companies paid in penalties and redress in 2019/20, more than the previous three years combined. 850 Capital investment projects Anglian Water has funded through its Green Bonds scheme since it launched in 2017. The new year has seen some new faces in senior positions across the utilities sector. Here are a few of the key appointments covered by Utility Week: Thames Water Former chief executive of Payments Systems Regulator Hannah Nixon has joined the board as Alistair Buchanan – ex-chief executive of Ofgem – steps down aƒer holding the position since 2018. Nixon's CV includes six years as senior partner at Ofgem, leading the development and implementa- tion of the RIIO framework, and three years at the Office of Rail Regulation. She also holds non-executive director positions at the National Grid ESO and the Jersey Competi- tion & Regulatory Authority. Centrica Group chief financial officer Johnathon Ford announced in January he was stepping down for personal reasons aƒer seven months in the role. He was replaced with immedi- ate effect by current group financial controller Kate Ringrose. Ford joined Centrica from Home- serve last June, replacing Chris O'Shea aƒer he was promoted to chief executive. Ringrose has spent 16 years with Centrica, holding a variety of roles across the energy, services and trading businesses. Igloo Disruptor brand Igloo Energy has appointed former Npower boss Volker Beckers to its board as non- executive chairman. Beckers, who leƒ the large supplier in 2012, has more than 25 years' experience in senior positions across the sector. His appointment marks his first role with an energy supplier since leav- ing Npower. Beckers' non-executive portfolio spans the private and public sec- tors as well as academia and with charities. ON THE MOVE On the cost of debt, the CMA is now suggesting an allowance of 2.12 per cent, down from the 2.45 per cent set in the provisional findings

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