Cost & Performance 2017-2018

On the 22 February 2019, the Utility Regulator published its latest Cost and Performance Report for NI Water .  This assesses performance to the end of the third 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.  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 2017-18 Cost and Performance Report shows that the company has broadly delivered on its final determination performance targets in the first half of the PC15 price control period.  The company continued to deliver an improved overall level of service to consumers, but marginally underperformed against its operational expenditure (opex) efficiency target.

Our key findings are summarised below:

Operating expenditure

NI Water’s operating expenditure was £208.6m in 2017-18.  This is above our regulatory allowance of £202.9m (in current prices), a difference of £5.7m.

Capital Investment  

The company invested £152.6m of capital expenditure (capex) in 2017-18, contributing to a total investment of £451m in the first three years of the PC15 price control period.  Capital investment in real terms has been constrained by the available public expenditure budget and 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.

Output Delivery

NI Water met and exceeded our PC15 Overall Performance Assessment (OPA) target in 2017-18.  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 35 of the 45 Outputs set in the PC15 final determination.  This includes 12 out of 15 consumer service measures and all but one of the water and sewerage quality outputs.  NI Water delivered the majority of its nominated output targets and maintained stable serviceability in all service areas.  A lag in delivery still exists in some areas as a consequence of public expenditure budget reductions in the first two years of PC15, but we expect NI Water to recover this by the end of the period.

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 concern 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.  Work on these development objectives continues and is critical to inform plans for investment and consumer service improvements in PC21.  We will continue to review delivery through our ongoing engagement with NI Water in the PC21 process and when we assess the delivery of PC15 outcomes for our PC21 price control determination.