Risk and return support for CMA referrals

Review of issues related to the allowed return in the CMA's provisional findings report on Ofwat's 2019 price review in response to four companies' appeals, including:

Review of estimation windows for cost of capital data

Total market return - comment on use of inflation, gearing assumption and volatility adjustment

Equity beta - comment on estimation windows, data frequency and the gearing assumption

Cost of debt - comment on the estimation window and the outperformance adjustment

Aiming up - comment on the CMA's approach to aiming up and interaction with financeability

Risk free rate - comment on appropriate use of parameters to calculate the risk free rate

Additional information: For further information, please contact procurement@ofwat.gov.uk