In July 2019, all water companies, including United Utilities, published PR14 reconciliation submissions which set out how they had performed against the PR14 incentive regimes for the first four years of the AMP6 period and how they expected to perform in the final year.
Ofwat published the PR19 final determinations in December 2019. These included details on the decisions made with respect to UU’s proposed adjustments, the resultant revenue and RCV adjustments that were included within the PR19 process and detailed models that had been used to support the published adjustments.
This year we have set out in detail how we have performed against the PR14 incentive regimes for the final year of the AMP6 period and shows how this performance varies from the position assumed in the FD. The updated information is set out in UUW PR14 reconciliation update (July 2020) (PDF 3.4MB opens in new window).
We have also provided copies of the updated data tables and reconciliation models that are used within the calculation of our proposed adjustments. UUW PR14 reconciliation update (July 2019) rulebook information (Zip file 4.9MB opens in new window)
Copies of our 2019 information are also available via the drop down box further down this page.
This document provides United Utilities response to the findings and issues raised during Ofwat’s industry wide review of the water supply issues that followed the ‘Beast from the East’ – the name given to the period of cold weather in late February and early March 2018.
We set out in detail how we had planned for, managed and supported customers before, during and after the event in an early response, which is published on Ofwat’s website at the following address: www.ofwat.gov.uk/out-in-the-cold
This document summarises the findings and conclusions from our earlier publications, it also sets out how we have responded to and learned lessons from the event to try to ensure that United Utilities and the sector more widely will be better prepared to handle similar, or more extreme, events in the future.
Our PR19 business plan for the 2020 to 2025 period needs to take account of the incentive regimes that were defined in the PR14 process and apply to our actual and anticipated performance in the 2015 to 2020 period. Ofwat requested that all water companies provide details of their actual performance for the first three years and predicted performance for the remaining two year of the period in advance of their main PR19 business plan submissions in 2018. Ofwat also requested that companies update this information in July 2019 taking account of actual 2018/19 data and updated predictions for 2019/20.
The updated information is set out in UUW PR14 reconciliation update (July 2019) (PDF 4MB opens in new window). This document details how we have performed against each of the PR14 incentive regimes for the first four years of the AMP6 period and how we expect to perform in the final year. It also provides an explanation of how this performance would be reflected in revenue and the opening RCV adjustments that would be made as part of the PR19 process.
We have also provided copies of the updated data tables and reconciliation models that are used within the calculation of our proposed adjustments. UUW PR14 reconciliation update (July 2019) rulebook information (Zip file 4MB opens in new window)
Copies of our 2018 information are also available via the following links United Utilities Water PR14 reconciliation (PDF 4.2MB opens in new window). And United Utilities Water PR14 reconciliation rulebook information (Zip file 5.7MB opens in new window).
Measuring resilience is one of the key challenges facing the water industry. Being able to consistently measure resilience across companies would be useful in helping customers understand their relative risk exposure, regulators and stakeholders in understanding and challenging company performance and to the companies themselves in learning from best practice and driving up standards. This report recommends that resilience is measured through a basket of measures and we have developed a potential metric to contribute to the current debate.
For PR19 we have commissioned Arup, supported by Vivid Economics, to carry out an independent study into the exogenous factors associated with WaSCs’ operating environments which influence the wholesale costs of wastewater services. The study investigated whether factors such as demographics, ecology, climate, geography and asset legacy issues have a quantifiable impact on the cost of delivering wholesale wastewater services in England and Wales. The work has brought together engineering and econometric evidence to identify and value the drivers of variation in costs between companies. The project assembled narratives on the causal factors that affect efficient costs, data on how these factors vary between regions, and statistical evidence on the relationships between different factors and efficient costs. This integrated approach to wastewater cost assessment adds a new and unifying perspective to existing commentary on the topic. View the report on understanding the exogenous drivers of wholesale wastewater costs in England and Wales (PDF 6.51 MB opens in a new window).
Arup and Vivid Economics have subsequently extended their research, providing additional insight and evidence into several key areas of cost assessment not covered in the initial report. Following the same approach of combining engineering and econometric expertise, the study has investigated the exogenous cost drivers within the Bioresources price control and the possibilities for enhancement modelling in Wastewater Network plus. Combining this with the results from the first study enables a fuller picture of wastewater costs to be developed which is used to propose a suite of econometric models for use at PR19. Importantly, the study investigates the extent and impact of measurement error and the selection of an appropriate efficiency challenge within the cost assessment process. Download the Arup and Vivid Economics report here (PDF 2.8MB opens in new window).
Together with Northumbrian Water, we have commissioned Economic Insight to consider options for the assessment of household retail costs at PR19 (PDF 2.18 MB opens in new window).
As part of the last price control process (PR14) Ofwat and United Utilities produced a report considering a range of issues associated with controlling prices for those customers who cannot choose their water supplier. The report reviewed some of the implications of this change in approach to cost assessment and considered a range of options for implementing the retail price control for those non-contestable customers. View the full report on retail costs assessment (PDF 687 KB opens in new window).
We have commissioned Equifax and Reckon to consider the role that deprivation and alternative indicators of arrears risk may have in the PR19 household retail cost assessment. View the report on capturing deprivation and arrears risk in household retail cost assessment (PDF 1.58 MB opens in new window).
As part of our work with Equifax and Reckon we produced a new set of data considering deprivation and alternative indicators of arrears risk. We have now updated this information with the latest 2017 data. View the underlying dataset for deprivation and arrears risk in cost assessment (XLS 97KB opens in new window).
As part of the programme of consultation supporting Ofwat's Water 2020 initiative, we have prepared a paper setting out our views on the best approaches to upstream pricing (PDF 1.14 MB opens in new window).
In response to Ofwat's December 2015 consultation on its approach to regulating wholesale services from 2020 and beyond, we have produced a number of papers to contribute towards the debate. These cover the indexation of price controls, future approaches to the RCV, the development of access pricing, approaches to customer engagement and considerations for the development of a price control for sludge.
Our response to the consultation on Ofwat’s draft PR19 price control methodology
In July 2017, Ofwat published its draft methodology for the 2019 Price Review (PR19). This is part of the Water 2020 process in which we are an active and engaged participant.
In general, we agree that the draft methodology sets out clear expectations for companies wishing to be judged as “exceptional” at PR19 and we observe that it seeks to establish a very challenging benchmark performance for individual companies.
Whilst we believe that in many areas the draft methodology successfully addresses Ofwat’s ambitions for the sector, we highlight a few key areas where we suggest that Ofwat considers modifying its approach.
You can read our response in the following documents:
UUW response to draft PR19 methodology (PDF 596 KB opens in a new window)
EY report – balancing risk and reward at PR19 (PDF 430 KB opens in a new window)
EY report – the cost of equity at PR19 (PDF 347 KB opens in a new window)
Residential retail competition
In July 2016 Ofwat published its assessment of the costs and benefits of introducing competition for retail services to residential customers in England. You can read our response on residential retail competition here (PDF 1.14 MB opens in a new window).
In November 2016 Ofwat will be consulting on its approach to setting service performance commitments at the next price review. This will include the balance between measures and targets being set nationally and companies setting their own measures and targets through local engagement. We have published a paper setting out our proposed approach to outcomes and performance measures (PDF 679 KB opens in a new window) as our contribution to the discussion.
Bioresources is being treated as a separate price control in the PR19 process. To support this process and to help to ensure that this is achieved in a way which will provide a level playing field for bioresources trading and processing, Ofwat have asked water and sewerage companies (WASCs) to submit their proposed allocation of the wastewater RCV to bioresources. United Utilities Water economic asset valuation for the bioresources RCV allocation at PR19 (PDF 229 KB opens in new window).
Water Resources is being treated as a separate price control in the PR19 process. To support this process and to help to ensure that this is achieved in a way which will provide a level playing field for potential water resource trading, Ofwat have asked water and sewerage companies (WASCs) to submit their proposed allocation of the wholesale water RCV to water resources.
The role that System Operators might play in the water sector has been the subject of debate for several years with no conclusions reached. Severn Trent, Thames Water and United Utilities have worked in partnership to produce a report which aims to stimulate productive discussion in the sector.
The paper reviews other sectors, considers what water sector problems System Operators might help address and different forms that water sector System Operators could take.
In particular it highlights the role that a ‘bottom-up’, company-led Systems Operator (or similar institutions) might have.
Download the full report ‘What role for System Operators in the water sector?’ (PDF 2 MB open in new window).