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Redetermining Water

17 Gorffennaf 2020

Redetermining Water [ 1.8 mb]

We submitted a version of this report to CMA’s redetermination of Ofwat’s PR19 price determination in June 2020. We did this for 2 reasons. Firstly, because of the impact of water bills on household incomes, and secondly because the CMA’s decision on these appeals will set an important precedent for other sectors such as energy. To do this effectively (and at the request of the CMA) we have looked at the underlying rationale for evidence of consumer preference for price controls that will shape the financeability requirements. This includes the use of consumer evidence in business plan development; the protections in place for consumers in vulnerable circumstances and the impact of COVID19. 

We have focussed our report on cross-sector, economy-wide issues which are not unique to water but play a key role in this price control. The issues we have focussed on are common to a number of essential service sectors where we believe that consumer outcomes could be improved.

In 2017 Citizens Advice produced Energy Consumers’ Missing Billions [ 0.88 mb], which looked at the excessive cost of capital in energy price controls. This was followed up in 2019 by Monopoly Money: How consumers overpaid by billions, which assessed the excessive cost of capital in price controls across price controls in multiple sectors. Together, this research shows that in previous price controls consumers have paid more than they needed to.

This has informed Citizens Advice advocacy approach to help get consumers a better deal from their monopoly network providers. 

In our view, the CMA can set a precedent in this appeal for more cost effective outcomes for consumers, while maintaining network financeability. We have responded to the CMA’s provisional findings on the NATS/CAA determination and we are now seeking to encourage the CMA’s redetermination of water companies to continue to pursue the best available evidence to determine the actual cost of capital.