Review of Incentive Framework and Cost of Equity for PR19 by PricewaterhouseCoopers

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The Water Services Regulation Authority awarded a contract to PricewaterhouseCoopers LLP for a review of the overall incentive framework for aligning company interests with customers, including the setting of the allowed return on capital, outcome delivery incentives, cost and financing outperformance, and reputational and procedural incentives.

The work considered whether a menu-based differential on the allowed return on equity would improve the incentive framework and its implications for other elements, assessed the desirability and feasibility of setting differential returns on equity for water and wastewater companies based on risk and ambition, and provided recommendations on the overall balance of financial and other incentives for PR19.

The contract value was £138,000.