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UTILITY WEEK | 9Th - 15Th MaY 2014 | 3 Leader Ellen Bennett This week 4 | Seven days 6 | Opinion Philip Sellwood, chief executive, Energy Saving Trust 8 | Interview Mark Bayley, chief executive, Green Deal Finance Company 13 Policy & Regulation 13 | News Welsh Water proposes cutting bills by 6% 14 | Market view EU tightens state aid rules 15 | Analysis Water blueprint becomes a reality 16 Finance & Investment 16 | News Water firms to take on £440m of work early 17 | Market view Ground-mounted solar generation is an attractive proposition 20 Operations & Assets 20 | High viz National Trust 23 | Market view Know your supply chain 24 Markets & Trading 24 | Analysis Gas prices muted despite crisis in Russia and Ukraine 26 Customers 26 | News Competition thriving in business sector 27 | Market view Making the most of the smart world 30 Community 30 | Subscriber focus hayley Ellis, FMB 31 | Disconnector PR14 is just the start of water reform The water sector is not much inclined to seek publicity, so there was little fanfare last week when the first of the new model business plans received the regulatory thumbs-up. Of course, South West and Affinity had already won their enhanced status, so we knew their plans were spot on. But Ofwat's dra determinations make for interesting reading – and provide some clues for the rest of the market. First up, it's clear that if a water company wants to succeed, it needs to eat, breathe and sleep the regulator's agenda. The dra determinations read like a checklist of the priorities Ofwat chairman Jonson Cox set out in his now famous speech to the Royal Academy of Engineering in March 2013. South West's launch of Watershare, a formal and independent mechanism by which it will hand back some of its gains to customers, and Affinity's novel community reporting model are no coincidence. They are proof too that there is room to interpret the regulatory agenda in different ways. No doubt other companies will be examining these models closely. Most important right now is the headline price drop. South West and Affinity sealed their enhanced status by agreeing right away to Ofwat's proposed 3.85 per cent cost of capital. This has seen their average price cuts jump to 7 per cent and 11 per cent respectively. That keeps the regulator, the politicians and the customers happy. But what of the fourth stakeholder – the investors? They will still be looking to make their returns, and not just at 3.85 per cent. Under the new regulatory model, higher returns will be achieved through outperformance rather than as a matter of course. In PR14, Ofwat has adopted the regulatory approach of the energy sector in lowering the guaranteed cost of capital but increasing the potential rewards for outperformance. Put bluntly, this means that companies will have to work harder to do better – and there's no doubt investors will be cracking the whip. Ofwat dropped a sledgehammer hint on how to achieve efficiencies at last month's City briefing, when it opened the door to takeovers of the smaller water-only companies. Other well-trodden paths to efficiency include management changes and structural reform. For the water sector, PR14 is only the start of the journey. Ellen Bennett, Editor ellen.bennett@fav-house.com GaS 13 | Political Agenda Mathew Beech 24 | Analysis Prices steady despite Russia- Ukraine crisis WaTER 13 | News Welsh Water proposes cutting bills by 6 per cent 15 | Analysis Blueprint becomes a reality 16 | News Water firms to take on £440m of work early 21 | Pipe up Ian Thomas 23 | Market view Know your supply chain ELECTRICITY 14 | Market view EU tightens state aid rules 17 | Market view Ground-mounted solar generation is an attractive proposition 20 | High viz National Trust ENERGY 6 | Chief executive view Philip Sellwood, Energy Saving Trust 8 | Interview Mark Bayley, CEO, Green Deal Finance Company 26 | News Competition thriving in business sector 27 | Market view Making smart work of it 27 | Market view Who cares about the climate? Knowledge worth keeping Visit the Downloads section of Utility Week's website for special reports and exclusive research commissioned for the utilities industry. http://www.utilityweek.co.uk/downloads