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Governments
across the globe are increasingly focused on both changing
the way utility services are provided and the way in which
those services are monitored and regulated. ICF International
is able to offer a unique set of skills to clients, governments,
regulators, utility companies, and financial institutions
alike who are responding to the challenges and opportunities
brought about by reforms to utility sectors, specifically
water and wastewater.
In the UK market we focus on providing expert economic
and regulatory analysis to clients in the regulated
utility sectors, particularly the water sector. Our approach
is to combine rigor and practicality to allow economics-thinking
to shape decision making. We provide advice on a range
of issues including:
In international markets, we work with governments, national
and local, to develop practical and monitorable plans for
utility service improvement. We have experience in all
phases of private sector participation, including options
assessment, documentation, and transaction support. We
have worked with clients around the world to design and
implement institutional and regulatory reform to promote
accountability, autonomy, financial viability, and greater
responsiveness to customers. We help develop appropriate
frameworks and work directly with oversight agencies to
strengthen their capabilities to regulate.
Our people are highly qualified and experienced economists,
with substantial track records in the economic and environmental
regulation of the water sector.
Our Clients
- UK Department of Environment, Food, and
Rural Affairs (DEFRA)
- The Scottish Executive, the government of Scotland
- Ofwat, the economic regulator for the water and sewerage
industry in England and Wales
- UK Water Industry Research
- Water UK
- Many of the privatized water companies in England
and Wales
- Other
regulated utilities
- The Environment Agency
- The World Bank
- KfW banking group
- Japan Bank for International Cooperation (JBIC)
Our Services
Economic and Financial Analysis
We have been at the leading edge in providing economic
and financial analytical support to the United Kingdom's
water industry. We have worked in a number of critical
areas for the price setting framework, including:
- Cost benefit analysis
- Asset maintenance planning
- Depreciation charges
- Cost of capital and approaches to
depreciation
- Comparative efficiency analysis and performance
benchmarking
- Least cost water resource planning
- Estimation of long run
marginal costs
- Demand/revenue forecasting
- Economies of scale in the
water industry
We recently completed a review of the draft price cap
decisions published by the water regulator in Scotland.
Current work includes a major water industry project on
cost benefit analysis.
Some of our recent work on economies of scale as been
submitted for publication in academic journals (Journal
of Regulatory Economics).
Commercial, Financial, and Operational Improvement
We conduct detailed assessments—usually as part
of wider consortiums—of the existing financial and
operational performance of utilities and make recommendations
on the options and the short- and medium-term action plans
that make the utilities more commercially oriented and
self-sustainable entities. These assessments typically
involve a large component of financial analysis to test
the utilities' financial viability under various scenarios
with different financial and operational targets. In parallel,
our approach also evaluates economic, political, and regulatory
environments to ensure that the recommended commercialization
option and procedure can improve utilities' performance
in the most efficient manner.
Competition, Access Pricing, and Tariff Strategies
We are an active participant in the debate on the development
of competition in UK water services. We have assisted water
utilities companies in examining the potential opportunities
and impacts on their businesses that will arise as a consequence
of the increased opening up of the large consumer supply
market in the UK. We have advised several companies on
the development of their access codes.
In addition to advising on access prices, we have advised
a number of water companies on developing their charges
schemes. This includes tariff re-balancing strategies and
recommending new tariffs, particularly for large water
consumers.
We recently completed a major study for the Scottish Executive
on cross-subsidies in water charges. The report provided
the basis for Ministerial guidance to the water regulator
on water charging issues.
Economic Analysis and Tariff Modeling
We are able to provide expert economic and financial analysis
of proposed policy reforms and develop frameworks and modeling
tools for in-depth analysis of tariff levels and structures.
The analyses and models assist in evaluating the level
of tariffs necessary to cover costs under different operational
and economic scenarios. Models are also developed to assist
in decision making regarding the level and structure of
charges for different customer groups in which there are
requirements for cost-reflectivity and tariff re-balancing.
We recently undertook such work in Lithuania.
Recent application of this work also has been in the form
of expert arbitration in concession disputes over tariff
increases, for example, in Jakarta and Belize.
Social, Environmental, and Resource Impacts
The threat of climate
change and the steady introduction
of environmental legislation at the European level require
responses from the water sector, both at the industry and
the company level. We are active in advising the industry
on its response to the introduction of new legislation,
through tools such as cost benefit analysis and economic
appraisal.. We also have advised government on the issue
of providing incentives for companies to manage leakage
and the cost implications of the Water Framework Directive.
We have recently undertaken work on the application of
cost benefit analysis to drinking water standards in England
and the assessment of the environmental and social impacts
of water resource projects.
We are currently engaged on a project for the Environment
Agency looking at the barriers to environmentally sustainable
water infrastructure in the South East of England.
Social and Environmental Impacts
The efficient and adequate provision of utility services
is a key issue for the future development of many countries.
Governments may seek a partnership with the private sector
or alternatively seek to reform organizations in the sector
or the structure of the sector itself. All of these solutions
have economic, social, political, and environmental impacts.
In designing a reform strategy, these impacts cannot be
overlooked or they may derail the process. We can help
address the range of issues and will work with our clients
to mitigate negative impacts.
Regulatory Reform and Policy Impacts
With previous colleagues, we have been at the forefront
of providing advice and commentary on the development of
the regulation and competition framework for water sectors
in the UK, Western Europe, and Australia. This has included
the publication of a number of authoritative reports and
contribution to the forthcoming Handbook
of Economic Regulation.
We also have undertaken client work in the UK and overseas
relating to regulatory reform.
Regulation and Institutional Development
We design regulatory frameworks and agencies and help
clients establish the conditions under which regulators
can carry out their responsibilities. Our projects often
include providing formal and on-the-job training to strengthen
the regulator's capacity to carry out its mandate.
Due Diligence
On a number of occasions we have provided advice to private
clients as part of technical due diligence in relation
to the proposed acquisition of UK water companies. We have
advised on aspects of regulatory risks and on the key economic
assumptions (e.g., cost of capital).
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