Ofwat's draft determinations show where the money is actually moving in water regulation

Third in a series on the reform of water regulatory appeals, following "Regulatory appeals are moving from the CMA to the CAT"[1] and "Regulatory appeals and the resourcing gap: who can afford to be heard?"[2]

PR24, the 2024 price review, sets price controls for AMP8, the current five-year period running from April 2025 to March 2030; the next review, PR29, is due in 2029 and takes effect from 2030. But a price control has never been entirely fixed for the full five years. Ofwat has always had some ability to adjust one mid-period, and under PR19, the previous review, companies could already ask for adjustments through two main routes. One was an interim determination under the licence's Substantial Effects Clause, which lets Ofwat reopen a price control if something happens that was not foreseen when it was set.[3] The other was gated allowances, which release funding for a scheme in stages, with Ofwat reviewing progress and cost at each gate before committing the next tranche.[4]

The cost change process, introduced as part of PR24, replaces that patchwork with a single, broader mechanism: the reopener referred to throughout this piece.[5] It covers PFAS removal (treatment for the "forever chemicals" increasingly found in drinking water), asset health, growth driven investment and major projects, all in one place. It also runs to a fixed annual timetable rather than being triggered case by case. Companies can submit claims in 2026, 2027 and 2028. Each round works the same way: a draft determination followed by a final determination a few months later. This is the first round.

Ofwat published its Cost Change 2026 draft determinations on 13 August.[6] Thirteen companies had claimed £4.3bn between them. Ofwat has provisionally allowed £3.39bn: 96% of the claims it judged in scope, and close to four-fifths of the total ask.[7] The money is concentrated. United Utilities is in line for £995m, more than any other company, and Southern Water for £749m, funding schemes such as the Sandown water recycling plant and the Hastings resilience scheme.[8]

Five months earlier, at the PR24 redetermination held by the Competition and Markets Authority (CMA), five companies asked for £2.7bn and were granted £463m. About 17% of what they sought.[9]

These are different mechanisms doing different jobs. The reopener funds specific schemes that were genuinely uncertain at PR24. The redetermination is a merits challenge to the whole settlement, cost base and cost of capital included. But put the two numbers side by side and a pattern appears: in the same sector, in the same year, far more money has moved through the reopener than through the tribunal.

That matters because the appeal route itself is changing shape. Appeals are moving from CMA redetermination, where a company could argue its way to a different number, to review by the Competition Appeal Tribunal (CAT). The CAT conducts that review in the style of judicial review. Winning there sends the case back to the regulator rather than producing a new number outright.[10] The tribunal route is narrowing at the same time as the reopener is proving it can deliver large sums quickly.

In January 2026 the government published its water reform white paper, "A new vision for water": its response to Sir Jon Cunliffe's Independent Water Commission, and the biggest overhaul of the sector's institutions since privatisation. This white paper proposes folding Ofwat, the Drinking Water Inspectorate and the water functions of the Environment Agency and Natural England into a single integrated regulator ahead of PR29.[11] Add that to the picture, and the regulatory contract is being rewritten from several directions at once. Companies deciding where to put their effort, into scheme justification or into appeal preparation, should read the August numbers as a signal of where the leverage in the system now sits.

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David Thomas is a founding partner of DT Economics LLP, a former panel member at the CMA and advises on regulatory appeals and price control disputes across water, energy, aviation and telecoms.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions, position, or policy of DT Economics LLP or its other employees and affiliates.

[1] Thomas, D., “Regulatory appeals are moving from the CMA to the CAT: what it means for regulated sectors”, DT Economics, July 2026 (https://www.dteconomics.com/post/regulatory-appeals-are-moving-from-the-cma-to-the-cat-what-it-means-for-regulated-sectors).

[2] Thomas, D., “Regulatory appeals and the resourcing gap: who can afford to be heard?”, DT Economics, August 2026 (https://www.dteconomics.com/post/regulatory-appeals-and-the-resourcing-gap-who-can-afford-to-be-heard).

[3] Ofwat, “Substantial effect determination” (https://www.ofwat.gov.uk/regulated-companies/price-review/substantial-effect-determinations/).

[4] Ofwat, “PR19 final determinations, Strategic regional water resource solutions appendix”, December 2019 (https://www.ofwat.gov.uk/wp-content/uploads/2019/12/PR19-final-determinations-Strategic-regional-water-resource-solutions-appendix.pdf).

[5] Ofwat, “Cost change process decision document”, November 2025 (https://www.ofwat.gov.uk/wp-content/uploads/2025/11/Cost-change-process-final-decision.pdf).

[6] Ofwat, “Cost Change 2026 Draft Determinations”, August 2026 (https://www.ofwat.gov.uk/consultation/cost-change-2026-draft-determinations/).

[7] Ofwat, “£3.4bn of funding set to unlock further improvements for water company customers, communities and the environment”, August 2026 (https://www.ofwat.gov.uk/funding-set-to-unlock-further-improvements-for-water-company-customers-communities-and-the-environment/).

[8] Smart Water Magazine, “Ofwat approves £3.4 billion in mid cycle funding for 13 water companies”, August 2026 (https://smartwatermagazine.com/news/smart-water-magazine/ofwat-approves-3-4-billion-in-mid-cycle-funding-for-13-water-companies).

[9] Competition and Markets Authority, “Water PR24 References. Final Determinations – Summary”, March 2026 (https://assets.publishing.service.gov.uk/media/69afb3e2917847c0a4c89a23/PR24_Final_determinations_summary.pdf).

[10] Thomas, D., “Regulatory appeals are moving from the CMA to the CAT: what it means for regulated sectors”, DT Economics, July 2026 (https://www.dteconomics.com/post/regulatory-appeals-are-moving-from-the-cma-to-the-cat-what-it-means-for-regulated-sectors).

[11] DEFRA, “A new vision for water”, February 2026 (https://www.gov.uk/government/publications/a-new-vision-for-water-white-paper).