Agenda – Oxera

Wastewater: the invisible service

June 2020

What efforts are involved in providing this ‘invisible’ service, and what have the challenges been during the COVID-19 pandemic? Furthermore, could the wastewater service be a key part of efforts to track the path of the virus—and to predict future outbreaks?

PR19 Redeterminations: Companies’ Statements of Case – Cost allowance

April 2020

Following Ofwat’s 2019 price review of water companies, four companies have appealed to the CMA for a redetermination of PR19. Each company has submitted its Statement of Case (SoC), which outlines its disagreements with Ofwat’s methodology and findings. An...

PR19 Redeterminations: Companies’ Statements of Case

April 2020

Following Ofwat’s 2019 price review of water companies (PR19), four companies have appealed to the CMA for a redetermination. Each company has submitted its Statement of Case (SoC), which outlines its disagreements with Ofwat’s methodology and findings. An important...

How could ownership affect performance?

January 2020

In the decade since the global financial crisis, Western Europe has seen increased calls for changes in the ownership of essential service assets. For example, during the UK’s 2019 general election, the Labour Party campaigned for the nationalisation of key strategic industries such as energy, water and telecoms. We ask how ownership can affect operational incentives and outcomes, and explore the implications for current ownership models and independent regulation

Regulation and policy in Italy: don’t throw away the baby with the bath water!

December 2019

The Italian water sector is undergoing a period of significant change. The sector does not require radical intervention in its ownership structure to improve investment levels and quality standards, but rather a package of measures to improve the management model and enhance independent regulation. How can tariff regulation be extended nationwide, and how can existing industry fragmentation be overcome?

Ofwat’s PR19 Final Determinations

December 2019

Ofwat published its final determinations (FDs) for the England and Wales water sector at 07.00 on 16 December 2019. There are many documents and a lot of detail that the industry will need to pore over in order to understand the implications. Here we explore the three main contentious issues in the sector: finance, cost efficiency and outcome delivery incentives (ODIs). We take an initial look at what has changed since the draft determinations (DDs), published earlier in the year.

What are firms for? Redefining corporate purpose

November 2019

What should be the purpose of a firm? To maximise profits or shareholder value, or to pursue wider societal objectives? Professor Julian Franks of London Business School, and Oxera Partner, discusses the roles of trust and implicit contracts in redefining corporate purpose. He looks at changes that may be required in regulated utilities, with a focus on water

Political control of state-owned utilities in the UK

November 2019

The UK Labour Party’s proposal to nationalise core utilities has renewed debate about whether nationalisation is a good or a bad thing. Tim Tutton, Associate at the Centre for Competition Policy (University of East Anglia, UK), takes a different approach. Focusing on the issue of political control, he explores whether lessons can be learned—from both the nationalised era and the privatised era—and how any future (potential) nationalisations might be made to work more effectively than in the past

Risky business: political uncertainty and the cost of capital for regulated firms

October 2019

Statements by politicians about nationalising or intervening in the functioning of regulated industries have attracted substantial media attention in recent times, leading to an increase in political and regulatory risk for regulated industries. A case study focusing on National Grid, the energy transmission company in the UK, suggests that increased political and regulatory risk can affect the valuation of regulated utilities through a combination of lower expected cash flows and a higher cost of capital

State aid spotlight on tax: the General Court’s judgments on Fiat and Starbucks

October 2019

In 2015, the European Commission ordered Starbucks and Fiat to each pay €20m–€30m in the Netherlands and Luxembourg, respectively, as their tax arrangements were found to constitute illegal state aid. On 24 September 2019, the General Court upheld the Commission’s Fiat decision, but annulled the Starbucks decision. What were the key economic issues in these cases, and what are the implications of the judgments?

Company responses to Ofwat’s slow-track draft determinations

September 2019

Introduction Water companies have recently responded to Ofwat’s slow-track draft determinations (DD). The key themes from those responses can be put into three key categories: cost assessment; financial issues; outcome targets. Cost assessment While supportive in certain areas, a number of companies...

Water sector draft determinations: a stocktake

August 2019

Ofwat’s July 2019 draft determinations for water companies in England and Wales signal that the regulator is toughening its stance on allowed returns, cost efficiency and performance incentives. Credit rating agencies have provided their own thoughts on what this means for the sector. We go under the bonnet to explore the detail