5 LONG-TERM ISSUES
32. Ofwat intends to evaluate its approach to this
price review with its stakeholders in the New Year. It will publish
the results of the evaluation and says that the findings will
inform its planning of the next price review in 2009. One of the
issues that it will consider is whether the five year review cycle
is the right length. Ofwat told us that there was a balance to
be struck between the need to take account of the long-term investment
required and the uncertainties in costs that are apparent even
in a five year cycle.[42]
33. In our first report we expressed concern about
the ability of the five year price review system to allow for
long-term investment, particularly that needed to meet the challenges
of climate change and the requirements of the Water Framework
Directive.[43] Water
companies are required to make 25 year resource plans and this
is one way in which long term issues can be considered.[44]
We are still concerned that the five year cycle will tend to
delay expenditure until the problems become urgent. We recommend
that Ofwat, the water companies and the Government use the opportunity
of Ofwat's evaluation of the price review process to assess the
long-term risks and challenges that the water industry faces and
report back to us on how coping with these risks will be funded.
42 Q1 Back
43
HC (2003-04)121, para 15 Back
44
Q1 Back
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