Utility Week

UTILITY WEEK | APRIL 2022 | 13 Water (WACC), which was a key tenet of appeals to the Competition and Markets Authority by a record four companies at PR19. Cuts to the WACC became a hallmark of PR19, which enabled bill cuts across the country but was criticised for making the sector less attractive to investors. In the report, Lisa Gahan, director of reg- ulation at South West Water, says: "Investors want to work with and invest in responsible companies and if Ofwat gets this right then it will continue to attract responsible inves- tors into the sector. What we don't want is methodological changes that suggest rates of return lower than the market suggests. It's an important parameter to get WACC right." The scale of what must be accomplished in the coming decades – including the sec- tor's self-imposed commitments to reach net zero emissions and reduce leakage rates by one third by 2030 as well as signiŽ cantly reducing harm from Combined Sewer Over- ' ows (CSOs) – will all take signiŽ cant invest- ment. The report highlights the need to align targets in AMPs with the Water Industry National Environment Programme (WINEP), Water Resource Management Plans (WRMPs) and other environmental expectations. Jo Harrison, director of environment, planning and innovation, United Utilities, says in the report: "The critical thing for the industry is having all our regulators in agree- ment. We need to have real clarity on the pace of change the country wants – this is the biggest thing we face as an industry." Compared with leakage, which saw a real performance step-change when clear tar- gets were introduced, she suggests Outcome Delivery Incentives (ODIs) should address speciŽ c challenges faced by the sector. However, speaking at the roundtable, one commentator said they saw "a big discon- nect between what Ofwat considers impor- tant and what we're hearing every day from stakeholders and customers". Participants suggested the sector had the will and interest to make improvements for customers and the environment through innovation, collaboration and with the use of nature-based solutions but feared regula- tion could hinder e™ orts. "We will probably be in for a rocky ride, so we should strap ourselves in for the next Ž ve years," one water company executive said. "It's unlikely we'll see the change some of us hope to see, which will be painful and demoralising for industry colleagues who want to do the best for customers and the environment." Ruth Williams, water correspondent continued overleaf in association with A Utility Week insight report in association with PA Consulting SHAPING AND PREPARING FOR THE PRICE CONTROL "It's too early to talk about bill rises at the moment. But in the past two price reviews we have seen bill reductions. As a sector I hope that won't be the case this time, for the simple reason we need to invest more than we have been doing." Bob Taylor, chief executive, Portsmouth Water "Encouragingly, we know from customer research that many would support paying more to support better and more sustainable outcomes, while at the same time we are very aware of the fi nancial challenges that some in our community are facing and we will continue to be here for them." Ian Cain, chief executive, SES Water "As part of PR24, we want to provide greater clarity on the role partnerships can play and how we will fund them. The price review can facilitate these solutions by providing allowances that cover companies' fair and effi cient share of the costs of improvements, consistent with their statutory functions, with third parties picking up their fair share too." Aileen Armstrong, senior director, Ofwat "Currently everyone pays the same per litre of water. It's like a regressive tax. Proportionately, poorer people pay more and is it fair to fund increases to meet climate change and tackle sewage in rivers through regressive water bills? "Obviously, we want to promote the effi cient use of water – but does the current tariff system encourage that?" Cathryn Ross, director of strategy and regulatory a airs, Thames Water "If there is a weakness, and I believe this is across all utilities, it's that we've not mastered optimising the data we collect, for providing the insight we need. But that's where the rich vein of insight might come from." David Hinton, chief executive, South East Water "If there is a weakness, and I believe this is across all utilities, it's that we've not mastered optimising the data we collect, for providing the insight we need. But that's where the rich vein of insight might come from." David Hinton and is it fair to fund increases to meet climate change and tackle sewage in rivers through regressive water bills? "Obviously, we want to promote the effi cient use of water – but does the current tariff system encourage that?" the role partnerships can play and how we will fund them. The price review can facilitate these solutions by providing allowances that cover companies' fair and effi cient share of the costs of improvements, consistent with their statutory functions, with third parties picking up their fair share too." Aileen Armstrong "It's too early to talk about bill rises at the moment. But in the past two price reviews we have seen bill reductions. As a sector I hope that won't be the case this time, for the simple reason we need to invest more than we have been doing." Bob Taylor many would support paying more to support better and more sustainable outcomes, while at the same time we are very aware of the fi nancial challenges that

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