Risk Index; Discharge Permit Compliance; Serious Pollution Incidents; Storm Overflows; and Bathing Water Quality. It has asked us to reconsider the PCL on 4 of those, the ODI rate on 6, and risk protections (including the collar on penalties) on 7 ODIs. 71. We will look at each of the specific ODI issues that has been raised by the Disputing Companies in a proportionate manner, recognising that the Disputing Companies may benefit from the approaches Ofwat took to other parts of the ODI package that have not been challenged. We propose to take account of our broader consideration of the balance of risk issues described below when considering the case for specific ODI changes.
Price control deliverables 72. The Disputing Companies have asked us to reconsider non-delivery PCDs and the time incentive PCDs. Non-delivery PCDs allow for the claw-back of funding when specified outputs/outcomes have not been delivered. Time incentive PCDs provide for rewards and penalties aimed at encouraging timely delivery of specified outputs/outcomes. The Disputing Companies have identified concerns over:
(a) the scope for a lack of PCD flexibility to exacerbate delivery risks and negatively impact on incentives (including potentially for the use of nature-based solutions); (b) the potential for PCDs to result in an expected negative return, in part because of the risk that companies may have to return funds related to work on a project that had been commenced but not concluded within a given time period; (c) the risk of PCDs giving rise to overlapping penalties; and (d) the scope for unnecessary administrative and regulatory burdens to be generated. 73. The Disputing Companies have also raised specific concerns with respect to the ways in which the following PCDs have been specified:
mains replacement, metering, lead, cyber (Network Information Systems), storm overflows, and phosphorus removal PCDs; and the time incentive PCDs. 74. We propose to look at each of the issues raised by the Disputing Companies in the light of the objectives that the PCDs are intended to help address. Risk and return 75. A key building block within the price control is the allowed return, which needs to be set at a level to ensure that debt and equity investors are appropriately 20