On 12 December 2014 our financial regulator, Ofwat, published its final response on our draft plan for 2015 to 2020.
This was the final part of the ‘price review’ process, which sets the limits for customers’ bills over this period.
We accepted Ofwat’s feedback in February 2015. This section provides a summary of our agreed plan for the five years from April 2015.
Read more about the plan we submitted to Ofwat in June 2014:
Future of the water sector – Service Incentive Mechanism
We commissioned Deloitte to carry out a statistical exploration of the water industry Service Incentive Mechanism (SIM), to support Ofwat’s review of SIM as part of its Water 2020 work.
SIM is applied across the water industry by Ofwat, our economic regulator, to incentivise water companies to improve their customer service.
The approach to outcomes at PR19
The outcomes framework was introduced at the 2014 price review to encourage companies to build their long-term plans around what their customers want and need. It is essential that customers’ and stakeholders’ views continue to be front and centre in companies’ plans, particularly in determining outcomes and associated performance commitments and incentives.
Ofwat is currently considering the outcomes framework for the 2019 price review, (“PR19”). To support Ofwat, we commissioned Economic Insight (a specialist consultancy) to assess a number of issues relevant to the design of the outcomes framework at PR19.
We provide below the report and summary presentation from Economic Insight, and a short note from Thames Water on some key points we have taken from Economic Insight’s report and our own planning work.
Approach to input price inflation for the retail household price control
We commissioned Economic Insight to develop a report to support the development of a methodology for allowing for inflationary pressures within retail household for the 2019 price review.
The retail household price control was first introduced at the 2014 price review. This report seeks to support Ofwat, the economic regulator, in further developing the approach to input price inflation for the 2019 price review.
Towards a risk and reward framework for PR19
Given the importance of implementing a coherent, reasonable overall risk and reward package for the 2019 price review, we commissioned EY to examine different ways in which the performance commitments, outcome delivery incentives, totex allowances, totex incentives, the allowed rate of return and the required rate of return can be combined. This report seeks to support Ofwat, the economic regulator, in refining its methodology for PR19.