Unsurprisingly, like their electricity-producing counterparts, water utilities have faced increased regulatory pressure to drive down costs for consumers. In December, providers finally got a clearer vision of the regulatory framework they must operate under for the next five years, after Ofwat delivered its final determinations for the 2015-20 period
Providers submitted their initial business plans at the end of 2013. The regulator then issued its draft determinations in August, in time for companies to make adjustments before final submission. Ofwat determines the prices the utilities may charge consumers as well as their service requirements.
Pennon Group (PNN), owner of South West Water, had the easiest ride of the process, after it was granted enhanced status by the regulator. This meant it received its draft determination in April and its business plan was unchanged. But United Utilities (UU) surprised markets due to the gulf between its estimates for spending and Ofwat's. Total expenditure for the group's wholesale waste water and water businesses had been in advance of the regulator's draft estimates by £769m and £215m, respectively. However this was eventually reduced to £179m and £9m in the final determination, prompting a 4 per cent rise in shares.