2018年-普华永道全球_Roadmap_to_reform_of_the_UK_water_sector_2页_476kb

Summary of Water Sector Reforms and Their Impacts

Core Content

The document outlines the progress and implications of major reforms in the UK water sector following the release of the Water White Paper and the Draft Water Bill. These reforms aim to modernize the water market, introduce competition, and improve efficiency and service delivery. Key areas include price control reforms, retail market expansion, upstream market liberalization, and regulatory and operational changes.

Main Reforms and Their Progress

1. Retail Market Reforms

• Progress:
  • The retail market is set to open to all non-domestic water and sewerage customers in England from April 2017.
  • Industry working groups are being established to develop a competitive market framework and market codes.
  • Ofwat is responsible for developing a licensing framework for retail entrants, including mutual license recognition with Scotland.
• Key Points:
  • Companies must set up legally separate entities to participate in the competitive retail market.
  • The policy debate on retail is largely concluded, and the focus is now on implementation.
  • Increased competition will pressure incumbents to improve service offerings and may lead to more customer switching.

2. Upstream Market Reforms

• Progress:
  • The draft Water Bill proposes opening the upstream market and unbundling licenses.
  • Ofwat is consulting on ways to achieve this, including regulatory incentives to promote water trading.
  • A High Level Group is tasked with progressing upstream reforms in parallel with retail, but timelines remain unclear.
• Key Points:
  • The introduction of water trading is expected to benefit consumers but will impact companies differently in terms of resource management and internal capabilities.
  • There is ongoing policy debate regarding the extent and forms of reform, and stakeholders are not fully aligned.
  • The design of upstream market arrangements is complex and will require significant collaboration between government, regulators, and industry.

3. Price Control Reforms

• Progress:
  • Ofwat is working on Future Price Limits (FPL) reforms, aiming to improve efficiency and enable market reform through separate retail and wholesale price controls.
  • The methodology for these reforms is due for publication in Q4 2012.
  • Companies are preparing business plans for PR14, anticipating changes in price control and regulatory requirements.
• Key Points:
  • The replacement of the Costs Principle with a more outcome-focused pricing model is expected.
  • The toTEX approach (which allows for performance-based pricing) is part of the reforms and will influence how companies are remunerated.
  • There is uncertainty around the detailed implementation of the methodology, which could affect business planning.

4. Regulatory and Reporting Reforms

• Progress:
  • Regulatory reporting is being simplified, with the replacement of June Returns with simplified Annual Returns.
  • Regulatory accounting guidelines are being introduced.
  • Ofwat has consulted on various aspects of consumer protection and customer engagement.
• Key Points:
  • Companies must adapt their compliance and reporting processes to align with new regulations.
  • Customer engagement will be a critical input for the 2014 price review, with the use of the Consumer and Governance Group (COG).

5. Other Important Developments

• Successful Acquisitions: Several companies, including Cambridge Water and Veolia Water, have completed acquisitions.
• Risk & Compliance Statements: Companies have released their first Risk & Compliance Statements and stripped-down Annual Returns.
• Social Finance and Consumer Protection: The government has introduced measures to support disadvantaged customers, including social tariffs and social finance guidance.
• Abstraction Reform: The Environment Agency is working on reforming the abstraction regime to reduce over-abstraction and facilitate abstraction trading.

Key Impacts on Water Companies

• Business Plan Revisions: Companies may need to significantly rework their business plans if Ofwat’s methodology does not align with expected changes.
• Compliance and Reporting Changes: New reporting and compliance requirements will affect how companies operate and engage with regulators.
• Operational Adjustments: Companies must prepare for increased customer switching, water trading, and changes in pricing and service delivery.
• Strategic Moves: Some companies are already making strategic moves to position themselves in the evolving market.
• Uncertainty and Complexity: The lack of a detailed implementation roadmap and the complexity of upstream reforms may lead to ongoing uncertainty for businesses.

PwC Insights and Support

PwC provides strategic and implementation advice to help companies navigate the reforms. They offer support in:

• Developing business strategies and optimizing operations.
• Preparing for PR14 and submitting well-justified business plans to Ofwat.
• Delivering AMP5/PRO9 targets and making compelling IDoK submissions.

Contacts

For further information or assistance, companies can contact PwC's water sector specialists:

• Richard Laikin
  Director, UK Water Sector Leader
  T: +44 (0) 207212 1204 | M: +44 (0) 7824 499099 | E: richard.e.laikin@uk.pwc.com

• Simon Evans
  Director, Assurance - Utilities
  T: +44 (0) 121 232 2289 | M: +44 (0) 7808 143 849 | E: simon.j.evans@uk.pwc.com

• Helen Edwards
  Consultant, Strategy
  T: +44 (0) 2078046507 | M: +44 (0) 7738 313358 | E: helen.s.edwards@uk.pwc.com

• Nicola Fomes
  Consultant, Strategy and Regulation
  T: +44 (0) 2072128047 | M: +44 (0) 7713 653430 | E: nicola.j.fomes@uk.pwc.com

Conclusion

The reforms are set to bring significant changes to the UK water sector, affecting how companies operate, price, and engage with customers. While progress has been made, the lack of clear timelines and detailed implementation plans remains a challenge. Companies must act proactively to influence policy and prepare for the evolving market landscape.