Ofwat softer stance in Final Determination

The squeeze on prices and investment announced today by Ofwat is a lot softer than feared. The Final Determination reduces prices by £3, after original plans to lower rates by £14. It also allows higher capital investment of £22.1 bn, £1.3 billion more than originally proposed.

It has been generally well received by investors with share prices rising on the news. Additional capital expenditure has been allowed on sewer flooding, another £250m. The stance on the Capital Incentive Scheme (CIS) is now more realistic. The CIS ratios have been reduced and a number are now below 100.

The key now will be to understand the detail of the Final Determination. However it is good news that Ofwat has listened to concerns and the publication today finally brings some certainty to the industry.