3rd Oct 2014 07:01
LONDON (Alliance News) - United Utilities Group PLC Friday scaled back its future infrastructure spending plans, as it submitted its latest proposal on how it would control the prices it charges customers over the next five years to water industry regulator Ofwat.
Ofwat in August told United Utilities that its previous proposals had "very material differences" against the regulator's own assessment of its spending plans and how that would affect price control, particularly on wholesale wastewater price controls.
In a statement, United Utilities said it now plans to reduce planned total expenditure by about GBP370 million compared with the previous proposal it put to the regulator, with about GBP280 million of that coming from cost efficiencies it expects to make between 2015 and 2020. The other GBP90 million will come from scaling back its trunk mains resilience work and National Environmental Programme work.
"Our revised plan would result in average household bills falling by 4.1% in real terms over the 2015-20 period, compared with a 2.3% reduction in our June plan," United Utilities said.
Ofwat had previously approved GBP156 million of United Utilities' spending plans for the next five years, and the company is now asking it to approve a further GBP628 million of total spending, mainly on planned waste water projects.
"In providing our response to (Ofwat's draft determination) we have reflected our aim to continue to
provide the best service to customers, at the lowest sustainable cost and in a responsible manner whilst delivering value for shareholders. In light of this, we have challenged our efficiency plans further and set, where practical, more stretching targets beyond those contained in our original business plan submission," the company said.
Ofwat had given guidance on an expected weighted average cost of capital range, and United Utilities said it has based its own calculation on this. It is expecting a 3.7% weighted cost of capital in its wholesale business, plus retail margin.
"We believe it is important that this level of (weighted average cost of capital) is maintained to support the financeability of our plan," it said.
Ofwat is expected to publish final determinations on the UK's water companies' spending plans between 2015 and 2020 on December 12.
By Steve McGrath; [email protected]; @stevemcgrath1
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