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Ofwat is writing to Anglian Water, SES Water, Thames Water, and Yorkshire Water to give them early notice that it has substantial concerns about their proposed costs for maintaining business as usual service (‘base expenditure’) for the 2020-25 period.

In particular Anglian Water, Thames Water and Yorkshire Water have asked us to allow them significantly more money than they currently spend on base or on-going expenditure for wholesale water and/or wastewater services. SES Water is seeking increased costs for providing retail services.

As it set out its price review methodology in December 2017, Ofwat expects water companies to make a step change in efficiency by 2025, allowing companies to deliver better services for customers, and protect and improve the environment, while at the same time keeping bills low.

Following detailed scrutiny of companies’ revised proposals, Ofwat finds that there is a significant gap between its view of efficient costs for retail and wholesale costs, and these four companies’ proposals. This early notice allows these companies additional time to review their costs before submitting further information at the end of August.

Ofwat Senior Director, David Black said:

“We said we would scrutinise each and every plan in detail to ensure they are robust enough to deliver a high quality, affordable and resilient service to customers in the next five years and beyond. We are disappointed that revised proposals from Anglian Water, SES Water, Thames Water, and Yorkshire Water have not yet risen to the challenge we have set them.

For this reason, we have taken the step of writing to these four companies now to allow them additional time to reconsider and ensure they are in the best interests of customers.”

Ofwat will announce draft determinations for fourteen water companies on 18 July. This will include setting out its views on companies’ proposed costs in full, including base expenditure and additional investment to improve services. This notice does not cover additional investment to improve services.

All companies will have until 30 August 2019 to respond to our draft determinations.

Notes to Editors

1. The letters are available on our website

• Letter to Anglian Water about PR19 cost gaps: https://www.ofwat.gov.uk/publication/letter-to-anglian-water-about-pr19-cost-gaps/
• Letter to SES Water about PR19 cost gaps: https://www.ofwat.gov.uk/publication/letter-to-ses-water-about-pr19-cost-gaps/
• Letter to Thames Water about PR19 cost gaps: https://www.ofwat.gov.uk/publication/letter-to-thames-water-about-pr19-cost-gaps/
• Letter to Yorkshire Water about PR19 cost gaps: https://www.ofwat.gov.uk/publication/letter-to-yorkshire-water-about-pr19-cost-gaps/

2. Our methodology for the 2019 price review is available here: https://www.ofwat.gov.uk/publication/delivering-water-2020-final-methodology-2019-price-review/