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Ofwat plans wholesale incentives in 2014 Price Review

31 August 2012

In a bid to encourage more bulk water trading between companies and discourage unsustainable abstraction from ground water sources, the water regulator has published consultation papers on its plans to introduce an outcome focused wholesale price limits in 2014.

The document outlines four cost performance incentive options where companies will be able to choose between increased flexibility and varying degree of implementation risk.
These provide incentives for companies to produce accurate estimates of expected expenditure in their business plans One approach being contemplated is to identify a ‘cap and/or collar’ around the median of the splits that the companies propose.

Ofwat also reaffirmed a commitment to use the concept of regulatory capital value linked to the retail price index at least until 2020. The consultation runs till the end of September.