PR24 explained

Every five years, water companies in England and Wales submit their investment plans to the economic regulator, Ofwat, for review and approval. This process is known as a Price Review and determines how much water companies can spend and charge their customers for the following five years. The current review period referred to as ‘PR24’, will determine water company plans for 2025 to 2030.  

Water companies submitted plans to Ofwat which included record levels of investment into new infrastructure and maintaining existing assets such as treatment works, sewers and water pipes. On 19th December 2024, Ofwat approved £104bn investment in the sector.

The UK devolved Welsh Government and the environmental regulators, Environment Agency, Natural England, Natural Resources Wales and the Drinking Water Inspectorate, impose statutory and regulatory requirements on water companies that water companies must meet.  

The business plans water companies submit to Ofwat take into account these statutory requirements but also set out how much they need to spend in their region to serve their customers and protect the environment.

Ofwat then decides how much water companies are allowed to spend, as well as how much they can charge their customers.  As part of this process, Ofwat also sets the amount investors can earn in return for providing the upfront capital investment.  

Crucially, water companies can only carry out new, needed and value for money investment and maintenance activities approved by Ofwat. Ofwat also limits how much water companies can charge their customers and specifies that the income they collect from customer bills must be spent on improving their operational performance and protecting the natural environment. Ofwat won’t allow companies to charge for the same activities twice, and if companies don’t deliver on their commitments, customers are refunded.

Where we are now

In July 2024, Ofwat published its initial decision, known as its draft determinations.  The regulator proposed cutting companies’ investment plans from £106bn to £88bn, which would have been the largest proposed cut in the sector’s history.  

Water UK responded to Ofwat’s draft determinations setting out how they would undermine the ability of the sector to deliver for customers and the environment. Companies  also individually responded to Ofwat’s draft determinations.  

Ofwat made its final decisions on 19th December 2024 to allow £104bn investment.

Companies have reviewed the detail and conditions attached to this decision and six companies initially deemed it not possible to deliver the necessary improvements and projects and have, as a result appealed to the Competition and Markets Authority. Five companies now remain in the appeal process: Anglian Water, Northumbrian Water, South East Water, Southern Water and Wessex Water. Ofwat agreed to Thames Water’s request for a deferral for up to 18 weeks from 18 March 2025.