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Ofwat Publishes Guidance on Risk and Reward

27 January 2014

Ofwat has today published guidance on risk and reward for water and sewerage companies as part of its 2014 price review process.

In December, water companies submitted their plans for the period 2015 – 2020. Ofwat will ‘pre-qualify’ companies in March that have outstanding business plans which pass its tests for outcomes, costs and affordability, and which have demonstrated robust Board assurance. Those companies that ‘pre-qualify’ will need to consider whether to adopt Ofwat’s risk and reward guidance. Any ‘pre-qualified’ companies that choose to adopt Ofwat’s risk and reward guidance will then benefit from a fast-track approval process.

In April, Ofwat’s Board will announce its decision on the quality of all other companies’ plans. Business plans requiring some intervention, will go through a standard process, while any company whose plan has significant shortcomings will be asked to resubmit its plans.

Cathryn Ross, Ofwat’s Chief Executive said: “Our role is to protect customers and ensure that efficient companies are able to finance their functions.

“We have already seen companies responding to our calls to listen to their customers. The guidance that we issued today offers a further opportunity for companies to secure the best possible outcome for their customers.”

Sonia Brown, Ofwat’s Chief Regulation Officer said: “It is important for companies and customers that risks and rewards are appropriately shared between them. This helps companies keep customers’ bills as low as possible and deliver the services that customers need both today and tomorrow.”

“It will be important for boards of water companies to consider this guidance carefully.”

Ofwat is due to make final decision on prices by January 2015. The guidance can be viewed by clicking here.

Story appears courtesy of Ofwat.