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The draft methodology is out - so what did Ofwat have to say about the upcoming Price Review (PR24)?
With the PR24 timeline and milestones now set, in this blog we look at some of Ofwat’s proposals to support the production of plan creation and the incentives it has put forward to encourage best plans submissions early on.
Getting it right first time
Taking note from the lessons learnt from PR19, water companies suggested that providing incentives to get the plan right first time would fully engage key stakeholders such as investors, managers and regulation teams in the price review process.
The draft methodology sets out Ofwat’s approach to encourage quality and ambitious business plans through a combination of reputational, financial and procedural rewards as incentives, but also penalties for those who fail to meet the expected standards on first submission.
For quality, the business plan incentives assessment will consider data, information and assurance; costs; outcomes; long-term delivery strategies; customer affordability and acceptability; and risk and return. Ambition will consider the extent to which they propose to stretch themselves to deliver more for their customers, communities and the environment during the next price control period.
There are undoubtably stronger incentives for water companies to submit their best possible plans first time around in comparison to those offered for PR19.
Ofwat also acknowledged in its learnings that PR19 was more sophisticated and covered more issues than previous reviews – consequently making it more complex. Creating these complex business plans and trying to get them right first time is costly and time-consuming, especially when manual processes and disconnected tools are used.
Using purpose-built tools such as Objective Keystone helps transform these resource intensive processes, accelerating the time it takes for water companies to author, approve and publish plans.
So what are Ofwat proposing when it comes to plan submissions?
Although it is for the water companies to decide the best way to present their proposals, Ofwat expects plans to adopt some common structure and be more focused and succinct, more accessible and easier to navigate than in PR19, as well as providing clarity and transparency for stakeholders.
- Some highlights of Ofwat’s proposal for plan creation and submission include the following:
- A guide to reading the plan which contains hyperlinks to all documents.
- Cross-reference between commentaries, tables and the business plan main narrative.
- Clear, succinct commentaries to accompany individual business plan tables, avoiding duplication of text elsewhere in the plan and including appropriate cross references.
- Use of a searchable pdf format for most documents.
- All documents published on the water and sewerage companies (WaSC) and water-only companies (WoC) website at the same time as submitting to Ofwat.
And in terms of the length of the plans, Ofwat proposes:
- A main business plan narrative in a single document – limited to 200 pages for WoCs and 300 pages for WaSCs.
- Overall limit to the number of documents in the submission – 80 for WaSCs and 50 for WoCs.
- A consistent long-term delivery strategy presented in a single adaptive strategy, rather than multiple alternate plans. The strategy should be no more than 100 pages for WoCs and 150 pages for WaSCs.
Objective Keystone’s end-to-end solution offers a unique approach to PR24 plan production, simplifying an often complex process.
Its advanced collaborative authoring capability means multiple authors, reviewers, and approvers from across the company (as well as external stakeholders), can collaborate on different content from one master document, at the same time. One-click publishing enables fully branded, print-ready, digital and HTML versions of the plan to be produced in an instant.
Producing plans with confidence
Ofwat expect submissions to include all the relevant data and information as requested in the methodology and business plan tables, and to be consistent, accurate and assured.
Good assurance and governance of PR24 submissions is vital if stakeholders, including Ofwat, are to have confidence in the information presented in them. The submission can only be of high quality where there are assurance checks on the systems and processes for developing the business plan, the production of the data and information and when stakeholders have confidence that a company’s full board has been integral to the governance surrounding
Company boards will be accountable for their submissions and the business planning processes that underpin all aspects of the plan.
Objective Keystone’s comprehensive review and approval process, means that nothing leaves the organisation unchecked. A full audit trail provides extra assurance of knowing who did what and when, and delivers visibility of every approval.
A streamlined approach to PR24 plan creation
Discover how our water and wastewater customers have been able to drive efficiencies and costs savings in the production of their regulatory documents on our upcoming webinar. Find out more here.