27th Jun 2014 11:35
LONDON (Alliance News) - Water companies United Utilities Group PLC and Severn Trent PLC Friday said they have resubmitted their business plans for the period 2015-20 after regulator Ofwat said their proposals on risk and reward were not in line with its expectations.
All UK water companies submitted business plans to Ofwat at the end of 2013 setting out their proposed investments plans for the next five years and how much they plan to charge customers.
At the end of the process, Ofwat marked the plans as either enhanced, standard or resubmission. Only two companies - Pennon Group PLC-owned South West Water and Morgan Stanley and M&G Investment-owned Affinity Water - were granted enhanced status, meaning they pre-qualified to adopt Ofwat's risk and reward guidance, enabling them to benefit from a fast-track approval process.
The new plans from United Utilities and Severn Trent follow extensive discussions with Ofwat, customer challenge groups and other stakeholders.
United Utilities said that following Ofwat's risk and reward guidance, it is now proposing an average real term bill decrease of 2.3% for household customers across the five-year period. This compares with an average real term bill decrease of 1.7% in its initial plan, reflecting the combined changes of a lower cost of capital and expenditure revisions.
In addition the plan includes total expenditure of GBP6.6 million, which is similar to its initial plan. However, the company said wastewater and water total expenditure has been reduced through "efficiencies and scope reductions". Total operating expenditure in the plan is GBP2.85 billion which is also similar to the initial plan.
Severn Trent Friday said its revised plan means customer bills will decrease in real terms by 1.5% rather than the 1.2% it initially proposed. Total expenditure will amount to GBP6.2 billion, up from GBP6.1 billion in the previous plan, including GBP379 million related to its Birmingham strategic resilience scheme.
The Birmingham resilience strategy includes a new Edgbaston groundwater source and two new aquifer storage and recovery schemes to provide resilience cover for the potential loss of the Frankley treatment works
Ofwat is expected to provide its view on the revised plan in August.
United Utilities shares were quoted flat at 875.29 pence Friday midday, while Severn Trent shares were quoted up 0.2% at 1,906.00 pence Friday morning.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
PennonSevern TrentUnited Utilities