For the second year in a row Pennon Group’s South West Water subsidiary is on track to achieve approaching twice the returns that the utility is allowed to make under the strict regime set by the industry regulator. In other cases there might be questions raised over just how tough a regime this is; much of the outperformance, though, is down to the company’s own actions.
Ofwat’s new rules began in April 2015 and allowed the water company to make a 6 per cent return on the perceived value of those regulated assets. The way it works in such regulated industries is that this gives an incentive to management to do better, to the advantage of the company and investors. In the last financial