The Competition and Market Authority, UK’s government body responsible for strengthening business competition, has published the provisional findings of its review of water price controls for 2020-25 set by Ofwat in December 2019, reports The Guardian. While the CMA agreed with Ofwat on many issues, it has also allowed the water companies limited additional costs.
Last December, water sector regulator Ofwat finalised its price review for 2020-2025 and asked suppliers to cut the average customer bill by £50 over the next five years. Four of England’s water companies ─ Anglian Water, Bristol Water, Northumbrian Water and Yorkshire Water ─ challenged Ofwat, saying the lower revenues could damage long-term investment in the sector, and asked the competition watchdog to redetermine Ofwat’s price controls.
The Chair of the CMA Inquiry Group, Kip Meek, said “the water companies need to be provided with more revenue to secure continued investment in the sector”, and that their “findings strike the right balance between bill reductions and the interests of current and future customers in resilient infrastructure, particularly in the face of climate change”.
Responding to the provisional findings of the CMA, Ofwat’s CEO Rachel Fletcher said they would “look closely at their analysis before submitting further evidence to inform their final decision in December”. Ofwat intends to “make the case to the CMA to ensure customers get a good outcome, and that it is not too easy for investors to make returns in this sector.”
The consumer group Citizens Advice was disappointed that the CMA did not recommend a better deal for customers, particularly when there are many people who are struggling financially. “The profits of these monopoly companies must be balanced by a fair deal for the general public”, said their chief executive Gillian Guy.
Ofwat’s statement acknowledges their price review is “demanding, making companies more efficient, improving their performance for customers, and closing off easy returns for investors”. The regulator is not surprised four companies found the challenge uncomfortable, since Ofwat’s “final determinations demanded a step change from the sector”.