Business Plan re-submission April 2019

At the end of January 2019 we received Ofwat’s ‘initial assessment’ of our Business Plan for 2020 to 2025. Each water company’s plan was assessed according to its quality, ambition and innovation and there were four categories – exceptional, fast-track, slow-track and significant scrutiny. Along with the majority of the industry, our plan was given slow-track status. 

Over the last couple of months we have been analysing Ofwat’s assessment in more detail and have addressed the areas that needed further work whilst ensuring that our plan can still deliver what matters most to our customers. On 1 April 2019 we re-submitted the relevant sections of our plan and below are the key changes and the areas where we have provided more evidence. The documents in the right-hand side panel of this page provide more information. 

Key changes to our plan

The enhancements we have made to our plan as a result of Ofwat’s feedback include:

  • Providing more support to vulnerable customers by including a new performance commitment to increase the reach of our Priority Services Register and increasing the stretch of our target associated with awareness of our vulnerability schemes
  • Removing three of our performance commitments to avoid duplication of measures whilst continuing to ensure we prioritise the areas that matter most to customers
  • Making changes to the ODIs associated with our performance commitments on outages, water quality compliance, usage, void properties and first contact resolution
  • Introducing an overall cap and collar on our package of ODIs of +/- 3% of RoRE to protect customers from significant outperformance
  • Demonstrating a clear line of sight between our performance commitments and increasing the resilience of our operations
  • Committing to embed a fully integrated, systems-based approach to resilience across our business
  • Demonstrating our ongoing commitment to collaboration with industry colleagues to address shared challenges and drive innovation
  • Providing evidence of our financeability against Ofwat’s notional structure in addition to our actual structure – although the latter provides a more stringent test of financial resilience to 2030
  • Removal of the uncertainty mechanisms for lead and business rates
  • Providing further detail on how we will signal changes to our dividend policy and a commitment to enhance our executive pay policy so it is linked to strong service delivery
  • Providing a set of fully compliant Board assurance statements for all Ofwat’s assurance requirements.

Provision of further evidence

The areas where we have chosen to maintain our position and provide additional evidence to support our original submission include:

  • Maintaining the ODI rates associated with many of our performance commitments following review by an independent third party who confirmed they were calculated appropriately and reflect customer preferences and valuations
  • Demonstrating that we have included stretching performance commitments for areas including risk of supply failure, first contact resolution, customer concerns about their water and supporting customers in financial hardship
  • Providing evidence that the costs we propose are efficient and will deliver what customers want while maintaining an average bill of £207 across the five-year period, a £16 reduction in real terms
  • Updating the cost adjustment claim to enable us to deliver our unique water softening responsibilities
  • Submitting an additional cost adjustment claim for wholesale electricity usage due to our high average pumping head and also for mains replacement investment to deliver leakage reduction, both of which have been externally verified by Mott MacDonald
  • Providing evidence for why the costs associated with reducing leakage by 15% should be viewed as an enhancement and not included in full within our base costs
  • Reassessment of our RoRE ranges and explanation of why a slight downside skew is not inappropriate
  • Continuing to apply a 25bps company-specific adjustment to the weighted average cost of capital (WACC) which reflects the additional cost of debt we incur because we are a small company, and providing additional evidence of customer support and benefit. In addition, our view that our costs are appropriate and efficient for our company circumstances (noted above), complement this company-specific adjustment.


Ofwat will now reassess our plan and provide us with a draft determination on 18 July. We will have until 30 August to respond and our final determination - which will confirm the service levels we must deliver and the bills we will charge - will follow in December, ahead of us starting to implement our plan from April 2020.


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