Read the original article on Telegraph.co.uk
Comments from Richard Khaldi, a water sector expert at PA Consulting, have been included in Jillian Ambrose’s article in The Telegraph.
In her piece, Jillian writes that Ofwat “has hit suppliers with the industry’s toughest price control regime since privatisation in a bid to force household bills lower amid the rumbling threat of renationalisation”.
Richard warns that the record crackdown will be particularly bleak for water suppliers that are not able to meet Ofwat’s stringent performance targets.
Water companies are able to claw back revenue allowances by exceeding performance targets, but Richard says the tougher benchmarks and prescriptive requirements for each company will make this far more difficult to achieve.
“Companies are very unlikely to be able to offset lower returns overall with operational outperformance rewards unless they are already at or near the upper quartile,” Richard adds.
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But, as Jillian goes on to say, for the top performing companies that do pass Ofwat’s stricter tests there will be loser limits on the potential financial rewards to help incentivise excellence while cracking down on sub-par suppliers.