UTILITY WEEK | APRIL 2022 |
5
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PR24 reveals fault lines
in water sector
This summer will see the starting gun red on the next price control for the
water sector. As set out in our major new report (see p12), and comments from
sector leaders at an event to launch it, PR24 represents a critical period for the
water sector.
Companies face multiple challenges between 2025 and 2030 – with pressure
to cut their own emissions, build resilience into ageing infrastructure, forge new
relationships with customers and take a lead on environmental protection.
The report conveys clear statements from water sector leaders that a new
approach to investment will be needed. They stress that PR24 must take a long-
term approach and nd ways to incorporate natural capital investments and
value data properly.
Ofwat also accepts the need for evolution within the sector and its own role
within that. However, it is around the crucial details of how this will be achieved
in practice where tensions may occur.
And it seems inevitable that tensions will surface as the process continues,
with many already clearly bubbling under. While public statements remain fairly
convivial, oˆ -the-record conversations with companies reveal a worrying pes-
simism about what is likely to be achieved in the next price control.
Industry insiders have shared their fears that Ofwat will merely tweak its
approach to PR19 for the next ve years and that there are few signs of the step-
change that is needed to propel real change. There are also concerns that Ofwat
will come under intense pressure to make an early call for substantial bill reduc-
tions across PR24, at a time when massive investment must be found.
It seems that many of the scars from the acrimonious disputes over PR19,
which led to a record four referals to the Competition & Markets Authority (CMA)
have yet to heal. Ofwat's high-pro le investigation into the management of
wastewater treatment plants (see p6) has not helped to build any bridges.
Incredibly, there are already mutterings about possible CMA appeals to PR24,
a full three years before the price control.
This sense of disillusionment with the price control process and souring
relationship between regulator and regulated is deeply worrying. The water sec-
tor has a great story to tell in its world-leading net-zero target and the eˆ orts that
are being made to get a handle on protection of rivers. But it needs the industry
and Ofwat to be pushing in the same direction, not pulling each other apart.
Our front cover asks the question, is it too late for PR24? I don't believe it is.
But for it to be a success, the companies and the regulator need to nd a way
beyond their diˆ erences to deliver the best outcomes for customers. On this at
least there should be no disagreement.
James Wallin, editor, jameswallin@fav-house.com
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Idox
Next-day switching piles pressure
on utility address management
https://bit.ly/3uXGKJy
Evides
Water – A Key Consideration in
Achieving Net Zero 2050
https://bit.ly/34H9Geo
Letter from the Editor
James Wallin
Neos Networks
The Digital Future of Renewables
report
https://bit.ly/3ie2vx5
