However the sector faces challenges going forward, especially if the draft determinations for prices limits recommended by the Ofwat are implemented, the rating agency added.
Furthermore, Moody's noted that the sector's regulatory framework provides operators with protection against falling demand and bad debts, both of which occurred over the last twelve months. A substantial effects clause is embedded in each water company's licence which allows them to submit a request to review the price limits with a a regulatory period if circumstances beyond prudent management control results in an adverse impact above a minimum materiality threshold.
Moody's view wont come as a surprise to UK water sector professionals. The key question it begs is the extent to which the regulator will listen to the views of the water companies and change its draft determination.
