Photo source: Bristol Water
Bristol Water will be disappointed by the Competition Commission (CC) provisional ruling. They failed to convince the Competition Commission that Bristol Water needs a much higher tarriff than Ofwat allowed in last November’s Final determination.
The CC ruled that Bristol Water should be allowed to increase bills by 2.3 % (after inflation) up to 2014/15. This is higher than Ofwat’s original determination of 1.7% but much less than the 6% that Bristol Water sought.
Bristol Water was the only water company to appeal to the CC. While the CC did agree that Bristol Water should be allowed some additional money to replace water mains and reduce leakage it rejected the other major projects that Bristol Water had proposed. Worse, it also reduced the cost of capital allowed from the 5.5% proposed by Ofwat to 5% (Bristol Water sought an unrealistic 6.7%). This is not surprising given the lower cost of capital agreed for other utilities by Ofgem.
The blog highlighted the risk that the cost of capital might be reduced in its article back in January. This ruling, if confirmed, will certainly deter future appeals. Water companies are in a privileged position compared to most companies in being monopolies with their income totally protected. The water companies need to focus on delivery and not get distracted.
No comments:
Post a Comment