Utility Week

24 | MARCH 2021 | UTILITY WEEK Policy & Regulation continued on p26 Looming CMA decision and Fletcher departure cause waves in water After many twists and turns, the CMA is finally poised to deliver its verdict on the four companies who appealed their final PR19 determinations. Ruth Williams delves into the final submissions from the appellant firms and the regulator. Meanwhile, the sector must brace for the departure of Rachel Fletcher as Ofwat CEO. A s Utility Week goes to press, the Com- petition and Markets Authority (CMA) is working to a deadline of the end of February to deliver its ultimate findings on the business cases of Anglian, Bristol, North- umbrian and Yorkshire Water. During February, all four – as well as Ofwat – were given their last chance to sub- mit their final arguments to the CMA. It follows a seeming shiƒ by the author- ity, detailed in last month's issue, on how it calculates cost of capital. This is a key metric and it could reverse some of the gains appel- lants were expecting from the body's provi- sional findings. The following is a summary of their final positions. Ofwat The regulator has been unmoved through- out the process in its attitude to efficiencies and has even argued that empirical evidence from the start of AMP7 showed companies could perform in line with expectations, despite the impact on costs of Covid-19. Ofwat said its concern for resilience was at least as great as that claimed by compa- nies. However, it said it put more value on efficiency and avoiding unearned returns because "it serves the interests of no-one if investors can make returns too easily". It said generous returns undermine incen- tives and damage the sector's reputation by attracting short-term investors rather than the longer-term ones the industry needs. The regulator urged the CMA to keep the consumer voice in mind and give it due weight, which – from a different angle – has also been the appellants' plea. Anglian Anglian CEO Peter Simpson told the CMA that risks to security of water have increased even during the redetermination process. During this AMP period the company claimed it could only address this via reducing sup- ply losses – namely through cutting leakage, therefore it requires funding for leakage base costs and smart meter programmes. Simpson concluded that the CMA's pro- visional findings provided much of the Analysis

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