Inflation and the Cost of Debt
Reference ocds-b5fd17-ed3ff6ae-4bd2-40c8-86f7-940c332137ad · O F W A T
Awarded to Steer Davies & Gleave Ltd for £89,640.
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Amounts and figures
Description
Awarded using Crown Commercial Service (CCS) Management Consultancy Framework Four (MCF4) (RM6309), Lot 4 Finance. Key parts of a price control include setting the cost of debt allowance and determining how the capital/asset value is indexed over time. There have been significant gains and losses by water companies from the inflation assumption used in our determinations being different to what occurs in practice. Citizens Advice estimate that the windfall to the water sector for the first 4 years of the PR19 period was in the order of £2bn. In the 2020-25 period these gains helped companies offset cost pressures and reduce gearing. After 2025 there are significantly more mechanisms in place to protect companies from cost shocks including indexing costs where independent indices exist and customers sharing a higher proportion of cost under and outperformance. Therefore, higher than expected inflation is now more likely to lead to higher profits for companies. In its provisional determinations Ofgem has proposed to set a nominal allowance for fixed-rate debt to reduce the exposure of consumers to inflation and adopting a different approach to indexing the Regulatory Asset Value…
Awards
| Awarded to | Amount | Date |
|---|---|---|
| Steer Davies & Gleave Ltd | £89,640 | 12 December 2025 |
Official publications
| Medium | Reference | Date |
|---|---|---|
| FTS | 79905e19-04cd-46eb-8d39-788422b426e8-883758 | 13 February 2026 |
| Contracts Finder | 79905e19-04cd-46eb-8d39-788422b426e8-883758 | 13 February 2026 |
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