All the water companies except Bristol Water have accepted the Final Decision. Why was this when early signals were that number including Thames and Southern were very unhappy with the Draft and Final Determination?
The step change came in December when Ofgem published its decision on pricing in the electricity and gas market called Distribution Price Control Review 5. This allowed a cost of capital going forward of 4% post tax compared with the 4.5% allowed by Ofwat. The blog understands that this was the major factor in influencing the water companies to accept Ofwat’s Final Determination. None except Bristol were willing to risk the Competition Commission and the chance it might say the cost of capital should be reduced!
Bristol Water are appealing because they believe the risk to customers implicit in the Ofwat determination is too high. They are particularly concerned at the low level of asset replacement equating to a water main life of 300 years. The other major factor is the fallout from the loss of water supply for 2 weeks in Gloucester after the 2007 floods. For several major population centres Bristol Water is dependent on a single source of supply and is consequently concerned about the impact on customers of a major failure.
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