News & insights
Date: July 2021 | Sector: Water | Expertise: Regulation & competition
Ofwat’s vision for the 2024 price review (PR24)
Direction of travel for PR24
Ofwat has published its latest PR24 consultation paper. This builds on its December paper outlining challenges for the sector and will be followed in summer 2022 by its full PR24 methodology. We have prepared a briefing note, in which we take a look at:
- What have we learned about Ofwat’s emerging thinking?
- What changes is Ofwat proposing?
- Where do we expect engagement and dialogue between Ofwat, companies and other stakeholders?
- And what will companies need to do to be prepared?
A wide range of ‘live’ issues
What are the key issues that will shape that framework? We expect that the focus will be on the following:
- Price control design issues including the treatment of water resources, bioresources and developer services activities. Ofwat is also likely to pay significant attention to the selection and calibration of the most appropriate outputs and incentives for PR24 and the long-term.
- The many analytical areas that are likely to evolve. Given potential changes in the overall price control structure, we can expect cost allocation and assessment to continue to be a key determinant. There will be increasing emphasis on asset health and resilience and on nature-based solutions. Ofwat may also refer to enhanced risk modelling to inform its thinking.
- Industry-wide planning and collaboration will come to the fore. WINEP reform and the developing work of RAPID will help to align long-term planning and investment decisions, and companies are expected to work towards more consistent treatment of environmental and social factors. Ofwat also expects evolution of the way customer research is brought into the price control process.
- The context – both in terms of policies and stakeholder preferences – will continue to develop. We can expect the Environmental Bill to be passed and implications of Net Zero for the water sector to be clarified. CCW’s Affordability Review will have implications for the treatment of water poverty. More generally customer input will continue to inform Ofwat’s and companies’ priorities.
Our initial analysis of these live issues and the other key factors that are emerging is described in a short briefing note, which is available to download using the link below.
To find out more, please contact our experts listed below.