What was the client issue?
Ofwat, the regulator of the water sector in England and Wales, wanted to review the way it regulated water companies and, in particular, to improve their focus on customers by developing an approach to regulation that would incentivise the delivery of outcomes sought by customers. It asked us to consider how best to do this.
How did we help the client solve it?
Having looked at the practical implications and likely effectiveness of different approaches, we recommended that Ofwat adopt a flexible framework, allowing companies both to propose their own outcome measures and incentive structures, with rewards and penalties (depending on the type of outcome), and to be assessed across all their measured outcomes.
Why was the outcome compelling for the client?
We helped Ofwat to devise a solid incentive framework for its new regulatory approach. It accepted our recommendations, publishing its resultant methodology in ‘Setting price controls for 2015-20-framework and approach’, available by clicking here.