Ofwat sets out its future approach to regulation


Philip FletcherLondon, U.K. — (METERING.COM) — November 2, 2006 – U.K. water regulator Ofwat has set the scene for its future approach to water regulation in a briefing to City investors and financial institutions. Chairman Philip Fletcher and new Chief Executive Regina Finn, who took up her post last month and was attending her first City briefing, jointly presented it.

Philip Fletcher warned the industry and investors not to assume that Ofwat would reach similar conclusions either on the cost of capital or on financial indicators at the next price review in 2009. Ofwat would take account of all market evidence in reaching its decisions to ensure that customers’ bills were no higher than necessary.

Regina Finn said the new Board structure would enable Ofwat to take a fresh look at regulatory issues. But there would be no changes for changes’ sake, as the Board recognized the importance of an open and consistent regulatory regime in delivering protection for customers.

Ms Finn announced that the next price review would again set price limits for five years. As part of the review process Ofwat would develop its work in addressing the long-term needs of the sector. And it would be asking companies to prepare 25-year business plans.

Ms Finn said: “We need to take a long-term approach to the way we regulate, and expect the companies to do the same in their planning. This will ensure that we safeguard not only the interests of today’s customers but also those in the future.”

On the issue of competition, Mr Fletcher said its development had been held back by constraints in the new water supply licensing regime, including the small size of the market. It was now time for a re-think and Ofwat would be raising with Government the issue of how to encourage competition in the water sector.