Current Students and Staff

// University News

18 May 2018

OFWAT among guests at water industry workshop to discuss the future of prices

Water companies and regulators for England, Scotland and Wales will meet at Loughborough University next week to discuss the future of regulated consumer prices.

On Wednesday, May 23, representatives from OFWAT, the Water Industry Commission for Scotland, Anglian Water and Severn Trent Water, as well as academics and experts, will take part in a workshop, which will be attended by delegates from the majority of the UK’s water companies.

The event has been organised by industry expert Professor David Saal, Co-Director of the Centre for Productivity and Performance (CPP) at the University’s School of Business and Economics.

photo of Professor David Saal

It comes as OFWAT, the English industry regulator, finalises its approach to the 2019 price review – due to be published in December.

Professor Saal said: “In its 2019 price review, OFWAT will need to ensure that it properly funds the operations and continuous improvement of the water industry.

“However, it also needs to ensure that it provides fair prices for customers.”

“The workshop will consider two important things.

“First, productivity and performance trends in the industry since privatisation in 1990.

“Second, how OFWAT should assess cost in its 2019 price review.”

The day will be divided into three sessions:

  • A morning panel discussion on ‘Water Industry Performance – Lessons from Different Countries and Ownership/Regulatory Models’ chaired by Professor David Parker, Cranfield University
  • An afternoon panel discussion on ‘Water Industry Cost Assessment for 2019 – Academic, Industry and Regulatory Perspectives’ chaired by Professor Monica Giulietti, Loughborough University
  • A roundtable on ‘The Implications and Outcomes for PR 2019 and Beyond’

Professor Saal said: “Given the current OFWAT consultation on cost assessment, the workshop is well placed to provide important insights into the process and influence the outcome of OFWAT’s final price determination in December 2019.

“Water regulation must balance the need for fair water prices for consumers against the need to adequately fund water services and environmental improvements.

“In this light, the workshop will consider important links between productivity, financial performance, and consumer prices that need to be considered by OFWAT in its 2019 price determination.”

Prof Saal, an expert on productivity, cost modelling and regulatory economics, whose research on the water sector spans the last two decades, recently finalised a report with Frontier Economics, commissioned by Water UK, on productivity trends in the English water and sewage industry since privatisation.

This report, which found evidence of reduced productivity growth in recent years, informs the current debate with regard to both price setting by OFWAT (PR 2019) and issues of ownership.

Professor Saal and CPP colleagues Dr Maria Nieswand and Dr Alessandra Ferrari have also been working in close cooperation with Anglian Water on its regulatory cost assessment modelling for PR 2019.

Via its contribution to influencing OFWAT’s regulatory cost assessment, which is an important part of PR 2019, this work will directly impact the prices paid by consumers for water and sewage services in England and Wales from April 2020.

In addition to Professor Saal’s research, Dr Anthony Glass and Dr Karli Glass, who are also members of the Centre for Productivity and Performance, were invited by consultancy firm Economic Insight to provide expert guidance on efficiency benchmarking on household retail cost assessment for Bristol Water and Wessex Water which was submitted to OFWAT’s cost assessment consultation.

They also worked on ways in which to generate knowledge transfer with water company staff.

Dr Anthony Glass said: “It is wonderful to be involved with this hugely impactful work that affects peoples’ day-to-day lives.

“This piece of work is part of a larger body of work that Karli and I are involved in on water price controls”.

To download Anglian Water’s initial cost modelling report (published Sept 2017) and CPP’s 32-page review of this modelling, click here.

To download Anglian Water’s revised models developed in partnership with the CPP (published March 2018), click here.

To download the report from Frontier Economics commissioned by Water UK (which Professor David Saal was a lead author on, published November 2017), click here.

To download the report from Economic Insight on behalf of Bristol and Wessex Water (informed by Drs Anthony and Karli Glass, published March 2018), click here.