(Alliance News) - The UK competition regulators said Friday they are going to look into Ofwat's proposed final pricing determination for the period from 2020 to 2025.
In December, water and sewage regulator Ofwat completed its price review for the period from 2020 to 2025, unveiling a GBP51 billion investment programme by UK utilities for the improvement of services and the environment.
Ofwat said that of that GBP51 billion spending plan for the next five years, GBP13 billion will go towards providing more resilient services and an improved effect on the environment, in the face of climate change and growing population.
The GBP13 billion also will be used to construct a new reservoir in Hampshire and a pipeline connecting water supplies from North Lincolnshire to Essex.
There will also be a reduction in average bills by around GBP50 per year before inflation, achieved by achieving greater efficiency through lower financing costs.
Key elements of the determination includes a post-tax real cost of capital for the industry of 1.9% on an retail prices index basis.
FTSE 100-listed peers United Utilities Group PLC and Severn Trent PLC have previously accepted the decision, with FTSE 250-listed water utility Pennon Group PLC joining them earlier Friday.
Thames Water Utilities Ltd has also accepted the price review.
However, unlisted firms Anglian Water Group Ltd, Bristol Water PLC and Northumbrian Water Ltd have asked the UK Competition and & Markets Authority to step in and review the prices.
As a result, the CMA said an inquiry group of independent panel members will be appointed to review Ofwat's price determination decision. The CMA expects Ofwat to give it 6 months to complete its review, although this can be extended if the CMA needs more time.
Inquiry Group Chair Kip Meek said: "Everyone needs water, so it's really important that customers' bills are not set too high, but at the same time the water companies have enough money to deliver an efficient and high-quality service. The CMA will look closely at whether Ofwat's decision strikes the right balance in this and other areas and will make changes if not."
Shares in United Utilities were trading 0.1% higher in London on Friday afternoon at 1,000.50 pence. Severn Trent was flat at 2,575.00p, while Pennon was 0.3% higher at 1,145.00p.
By Paul McGowan; paulmcgowan@alliancenews.com
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