Draft Determination

On 18 July 2019 Ofwat published its Draft Determination on our Plan. We submitted our response in August 2019.

Our Representation on Ofwat’s Draft Determination centres around the following key points:

• In line with Ofwat's methodology, we give primacy to the views of our customers, derived from the sector-leading customer engagement we have undertaken to support our Plan
• We seek to ensure that the Plan holds true to the long term ambitions set out in our Strategic Direction Statement (SDS)
• The challenges that our already water-scarce region faces relating to our exposure to the impacts of climate change, along with the scale and pace of growth that is expected, warrant a very different approach to that proposed by Ofwat
• Consistent with the objectives for PR19 set out by Government in its Strategic Policy Statement, our proposals in this Representation seek to ensure that the step change in investment to enhance the resilience of our region to the increasing risks of drought and flood is preserved. We also provide a means to ensure we can facilitate our region’s sustainable growth ambitions whilst protecting customers should growth prove slower than expected
• At all times, our views are informed by an analysis of what is in the long term interests of our region, our customers and the environment. This includes ensuring an adequate level of capital maintenance expenditure to ensure we meet drinking water and environmental quality standards and continue to improve overall service quality to customers
• With these points in mind, our Representation proposes a range of approaches, and highlights areas where Ofwat has not fully considered previously submitted information that will close the gap between Ofwat’s view of the necessary level of Totex and our own
• In our revised plan the increase in botex between AMP6 and AMP7 is just 1.3% (£47m), despite the increased challenge of maintaining our assets in the face of demands from growth and climate change, and inflation in wages and other base costs
• At the level of WACC that Ofwat sets out in the Draft Determination, in the context of the overall balance of risk and return represented by the Draft Determination, we find that neither the notional nor the actual company is financeable.

For a copy of the documents submitted please see below. The next step is for Ofwat to publish its Final Determination on 11 December 2019.