There is however a difference between incorporating new market data (eg on the level of interest rates in the economy) versus assessing new arguments on methodology, and where methodological points are made for the first time in our redeterminations, we will need to understand why they were not raised during the more than four-year Ofwat PR24 process. 83. We intend to apply a cut-off date for market data of 30 June 2025 for our provisional determination and we will similarly apply a suitable cut-off date in advance of our final report to provide sufficient time to quality assure our estimates and consider interactions with the rest of our redeterminations.
Our intention for a final report issued in mid-December 2025 (as per our target in the administrative timetable) would be to apply a cut-off of 30 September 2025. Balance of risk 84. All five Disputing Companies have raised concerns about the overall balance of risk in Ofwat’s PR24 FD, arguing that the overall package is skewed to the downside (ie does not offer a reasonable opportunity to earn the base allowed return on equity). 85. The alleged imbalance in the package is largely linked to differences in view on what is achievable and what levels of funding and returns are needed by the notional efficient company.
The Disputing Companies’ proposed remedies on balance of risk issues largely relate to the underlying building blocks of the price control, ie the totex allowances, the outcomes package, and the allowed return. 86. Therefore, as far as possible we will seek to address arguments on overall balance of risk ‘at source’, in line with the approach set out in the earlier sections of this document. 87. With regard to the suite of risk mitigation and uncertainty mechanisms within PR24 (which may influence what level of risk investors are exposed to over the price control), we note that the Disputing Companies have only asked us to consider two specific uncertainty mechanisms – the ASM and the OAM.
88. We will therefore assess the appropriateness and the design of the ASM and the OAM as part of our assessment of the overall balance of risk and return. We do not intend to review any of the other uncertainty mechanisms or risk protections within the price control. 89. In particular, when it comes to companies’ potential exposure to finance risk, we acknowledge that Ofwat has asked us to think carefully about the treatment of inflation within the price control. We will consider these matters as part of our redeterminations of the allowed return. However, we do not think it would be appropriate for us to consider changing the approach to indexing the Regulatory 22