Determination of customer water price ceilings in England and Wales for 2020-25 and 2025-30
Anthony Glass is working on water supply, retail services and sewerage services cost models for water companies, whilst industry regulator Ofwat develops its own cost models. After consultation with companies, Ofwat settles on the models to use to set caps on the prices companies can charge.
Anthony Glass is a retained Academic Associate at the consultancy Economic Insight. Economic Insight and Glass advised Yorkshire Water on its appeal to the Competition and Markets Authority (CMA) against the price caps that Ofwat set for the company for 2020-25.
Glass' role involved using a broader range of efficiency models than Ofwat used to determine companies' price caps to show that Yorkshire's water supply business was consistently relatively cost efficient. Hence, there was limited scope for Yorkshire to make cost efficiency savings, so it needed a higher price cap and higher revenue allowance to support the resilience and financeability of its operations. The CMA concurred and Yorkshire's appeal was successful. This resulted in a £93 million increase in Yorkshire's revenue allowance for the period to April 2025.
Research funding was obtained from Severn Trent Water to make a start on developing their retail services cost models for the next 5 year regulatory period. Ofwat will simultaneously develop on its own retail services cost models. Ofwat and the companies will then consult on these models and Ofwat will decide which models it will use to set the caps on the prices that companies can charge their customers for retail services over the period 2025-30. This small research project helped establish a working relationship with Severn Trent ahead of a larger bid for Knowledge Transfer Partnership (KTP) funding.
In partnership with Severn Trent Water, knowledge transfer funding was obtained from UKRI for an 18 month project. Economic Insight and Glass have successfully recruited a KTP Associate and the project will begin on 31 January 2022. The project will complete the development of the company's retail services cost models for the next 5 year regulatory period.
For the same 5 year period, the project will also build the company's water supply and sewerage services cost models, whilst Ofwat develops its own models. Ofwat and the companies will then consult on these models, before Ofwat decides which models it will use to set the caps on the prices that companies can charge their customers for water supply and sewerage services over the period 2025-30.
Academic involved: Professor Anthony Glass