comprehensive solution prior to PR24. 24 Ofwat’s approach may also provide additional allowances to companies within this price control period (AMP8) 25 and subsequent AMPs. 26 Ofwat’s review provides an alternative route to address the issues raised by the Disputing Companies. Frontier shift 50. Ofwat defines frontier shift as the rate of efficiency improvements that even the most efficient companies in the industry can achieve, from improvements in working practices and the introduction of new technology. 51. We will evaluate the approach used to set the frontier shift and the evidence submitted by Ofwat, the Disputing Companies and third parties.
27 We will also consider to which areas of costs the frontier shift should be applied. Other base costs issues 52. We plan to deprioritise as disproportionate the request from Anglian and Southern that we use latest average bill forecasts to set residential retail base expenditure allowances. The methodology that Ofwat has applied is unchallenged and the necessary verified, robust sector-wide data is not currently available for all companies. The necessary data collection and verification exercise would be onerous, time consuming and not fully under our control. We would need all water and wastewater companies, not only the Disputing Companies, to submit data.
It would also require us to assess all water and wastewater companies’ forecast bills, cross check these against business plan figures and rely on water companies responding promptly to our requests for clarifications. Finally, we would need to update models we would not otherwise be changing. In addition, the evidence we have received to date indicates that this request is likely to be de minimis. 53. We plan to deprioritise as de minimis the claims relating to business rates, National Insurance changes, Ofwat’s licence fee, and the Environment Agency ( EA ) levy.
Each claim accounts for 0.5% or less of water plus wastewater total totex allowance and none raises substantial wider issues of principle. 24 Ofwat (2024) PR24 final determinations Roadmap for enhancing asset health understanding in the water sector , Section 2, and , Ofwat (2025) PR24 redeterminations Expenditure allowances – addressing asset health, paragraphs 2.12 to 2.17. 25 Ofwat’s PR24 FD covers the five-year period from 2025 to 2050, also known as Asset Management Period 8 (AMP8). 26 Ofwat (2024) PR24 final determinations Expenditure allowances , page 93. 27 Ofwat (2025) Expenditure allowances – common issues page 186. 15