Cost & Performance

On the 20 March 2018, the Utility Regulator published its latest Cost and Performance Report for NI Water. This assesses performance to the end of the second year of the company’s third regulatory price control PC15. PC15 covers the six year period from 2015-2016 to 2020-2021.

The Cost and Performance Report outlines our independent assessment of how the company performed over the period, against the efficiency targets and key performance indicators outlined in the PC15 Final Determination and associated Monitoring Plan. Where appropriate, we have also compared NI Water’s performance with companies in England, Scotland and Wales.

The assessment of NI Water’s performance undertaken for our 2016-17 Cost and Performance Report shows that in overall terms the company has largely delivered on their Monitoring Plan performance targets in the first two years of the PC15 price control period.  The company outperformed its operational expenditure efficiency target, while at the same time continuing to deliver an improved overall level of service to consumers.

Our key findings are summarised below:

Operating expenditure

NI Water’s operating expenditure was £200.6m in 2016-17.  This compares favourably to our regulatory allowance of £201.1m (in current prices), a difference of only £0.5m.

Capital Investment  

The company invested £154.3m of capital expenditure in 2016-17, contributing to a total investment of £298m in the first two years of the PC15 price control period. This was £19m lower than the nominal figure of £317m included in the PC15 final determination due to reductions in public expenditure budgets.  This constrained NI Water’s ability to deliver the PC15 outputs in real terms even after the benefits of lower than anticipated inflation is taken into account.  We have worked with NI Water, DfI and other key stakeholders to ensure that the company delivers the best possible package of outputs within the funding available.  We will continue to assess cumulative delivery over the medium term taking account of changes in budget, inflation and the delivery of capital efficiency.

Outputs

NI Water met our PC15 Overall Performance Assessment (OPA) target in 2016-17.  This is a composite performance score used to assess NI Water’s overall delivery of service to customers.

The company met or exceeded planned delivery in all but three of the 45 Outputs set in the Monitoring Plan.  This includes 14 out of 15 consumer service measures and all of the water and sewerage quality outputs.  NI Water delivered all of the nominated output targets and maintained stable serviceability.

Delivery of development objectives to improve planning capability in time to inform the business plan submission for PC21 is a key requirement for NI Water in PC15.  In our PC15 mid-term review we considered progress on these outputs and expressed concerns about whether NI Water could deliver them in time.  In response, the company stated it still anticipated completing them in time to inform the PC21 business plan and we will assess delivery when reviewing PC15 outcomes in the PC21 price control determination process.