A Guide to PR24

It is fair to say that the water industry faces challenges in the future. Climate change is a real threat to supply, the need to switch to more sustainable methods is as important as ever, and customer demand is expected to increase. This is an expensive business, and this is where PR24 comes in. 

What is PR24?

PR24, also known as the 2024 Price Review, is a review by the UK water regulator Ofwat that sets price controls for water and sewerage companies between 2025 and 2030. The review framework aims to improve both the customer experience and the environmental impact of the water industry through a range of measures 

Ofwat is England and Wales's economic regulator for water and sewerage companies. It ensures these companies provide high-quality services at fair prices, protects consumer interests and promotes competition within the industry. Ofwat also oversees environmental standards, resilience, and innovation in the water sector.

Ofwat Draft Determination for PR24

Ofwat's PR24 Draft Determination outlines the investment package for water companies in England and Wales. It focuses on protecting rivers and seas, building new reservoirs, reducing leaks and improving company performance. 

Key decisions include stringent performance targets and financial incentives to ensure better customer and environmental outcomes. The impact on water companies involves increased investment requirements and stricter performance standards, while consumers can expect improved service quality and environmental benefits.

The PR24 Business Plans

The PR24 business plans submitted by water companies require detailed proposals for infrastructure improvements and environmental projects, alongside specific goals for service quality, leakage reduction, and customer satisfaction. They must also make financial projections, including budgets, cost estimates, and revenue forecasts for the next price review period from 2025 to 2030. 

Ofwat evaluates these plans according to three main criteria: customer impact, which involves assessing how plans will affect service quality and bills; environmental benefits, which evaluate contributions to environmental sustainability, and value for money, which ensures efficient use of resources and reasonable costs.

Ofwat has certain expectations for PR24 business plans. They should be ambitious, aiming for significant improvements in service and environmental outcomes. They should also be transparent, providing clear and comprehensive information on all aspects of the business plan. They should also prioritise stakeholder engagement by involving customers and stakeholders in planning.

Timeline of PR24

PR24 started over a year ago, but here’s a breakdown of the key dates and deadlines for submissions, consultations, and determinations. 

2nd October 2023: Submission of PR24 business plans. Water companies had to submit their business plans by 2nd October 2023, detailing investment plans, performance targets, and financial projections.

11th July 2024: Publication of PR24 draft determinations. Draft Determination: Ofwat published their draft determinations on July 11th, 2024, outlining proposed decisions and policies.

23rd-24th July 2024: 'Your water, your say' meetings were held. This was the start of the consultation phase, during which customers' and other stakeholders' input could be gathered. 

28th August 2024: The consultation period closed.

19th December 2024: Ofwat will publish their final determinations on 19th December 2024, incorporating feedback and finalising investment and performance requirements.

How PR24 Impacts Water Companies and Consumers

PR24 has implications for both water companies and consumers. Water companies face stricter performance standards, potential penalties for non-compliance, and financial incentives for meeting targets. Increased investment requirements may strain resources but also drive infrastructure and service quality improvements.

Meanwhile, domestic and business water bills may rise due to higher investment costs, with proposed increases averaging around 40% over the period. However, these investments aim to enhance service quality, reduce leaks, and improve environmental outcomes, benefiting everybody in the long run. In a competitive marketplace, this could mean that for some businesses, switching water suppliers could become an attractive option, while others may find that installing new equipment may benefit them. 

PR24 Final Methodology and Beyond

The final PR24 determination will set a regulatory framework for water companies between 2025 and 2030. It will include detailed performance targets, financial incentives, and penalties to ensure companies deliver high-quality services and environmental benefits.

It has long-term impacts on the water industry. Stricter performance standards will drive improvements in service delivery, reducing leaks and enhancing customer satisfaction. Increased focus on environmental projects will lead to better protection of rivers and seas, promoting sustainable water management.

Companies will also face higher investment requirements, potentially impacting their financial stability and leading to higher consumer bills. Financial incentives will encourage companies to adopt innovative technologies and practices, which is expected to improve overall efficiency and resilience.

The implications of PR24 for businesses, consumers, and the water industry could be massive. The process has been in place for a long time now, and when it comes around, it will lead to big changes in the way the industry runs in this country. But whether you work in the industry or you’re just a consumer or business who is conscious of both your costs and our future sustainability, staying informed on PR24 is extremely important