With PR14 complete, the water and sewerage industry in England is deep in the preparations for retail market opening in April 2017.  Time is short, and companies are at various stages of readiness in each area where they need to prepare.  Companies will be refining their retail strategies, the structure and functions of their wholesale businesses, their processes, data and systems.  Reputations will be at stake, and companies will need to provide assurance to support the Secretary of State’s decisions to commence the shadow market in October 2016 and ‘go live’ in April 2017.

Perhaps the most important interaction to get right will be between the company’s wholesale and retail arm.  Companies will need to show that they can treat all retailers (internal or external) in the same way, and that wholesale pricing is cost-reflective. 

Meanwhile, Ofwat is laying the ground for upstream reform.  PR19 may involve further separation of the value chain and price controls, potentially splitting the RCV.  There is likely to be considerable industry debate over whether and how this should be done, that will need time to play out.

Companies now have a good understanding of the delivery challenges they face in AMP6.  The PR14 determinations were the most complex to date, with a number of regulatory incentives companies will need to optimise.  Leading companies will have made careful plans to maximise efficiency and ODI rewards, while at the same time out-performing on customer and service delivery, and respond to the reduction in cost of capital.

We work with many of the companies in the sector, with investors and with regulators. We can help you:

  • Develop your business strategy and optimise your operations to pre-empt and capitalise on proposed market reforms
  • Support your market reform readiness preparations covering level playing field, systems reviews, process reviews, skills requirements, and data readiness
  • Develop your market reform assurance programme
  • With your assessment of upstream markets and what the reforms might mean for your business
  • Optimise your delivery of the AMP6 settlement and targets, including capital and operational efficiency and delivery plans, technology and customer service improvement, taking account of trade-offs within the PR14 settlement
  • Navigate through mergers and acquisitions, having worked on many of the recent transactions in the sector
  • Provide regulatory, financial and internal assurance over your external reporting to Ofwat, investors and other stakeholders, and your internal programmes of work