The Direct Procurement for Customers (DPC) programme was an important part of Ofwat's PR19 determination as an alternative and more competitive way to fund major water and sewerage infrastructure projects (over £100m in capital value).  

Under DPC water and sewerage undertakers procure such projects from bidders as a way of financing them more efficiently, along similar lines to the Thames Tideway project.  

Ofwat has now decided that part of one of these projects, Anglian Water's Elsham Transfer and Treatment Scheme, would be better delivered by Anglian Water in-house rather than contracted out.  Anglian Water had realised that delivering the full scheme by DPC would not allow it to meet its statutory environmental obligations.  Ofwat has therefore allowed Anglian Water to recover an additional £83.334m from customers over the period 2020-25 (£200k less than Anglian Water requested), so that it can deliver the transfer pipe and conditioning plant components of the project in-house and so meet its environmental obligations.

Anglian Water has also 'sweetened' the deal for customers by committing to invest an additional £1.4m in lead pipe replacement and undertaken to replace pipes in at least a further 280 projects - wholly funded by shareholders.  

In addition, in what seems to be a stretch to its clear powers under paragraph 15A of Anglian Water's licence, Ofwat has amended Anglian Water's internal interconnection delivery performance commitment (one of its PR19 performance commitments) to include the elements of the DPC project that will now be delivered in-house.  Does this perhaps open the door for other companies to amend performance commitments?

The power to amend performance commitments aside, the bigger question is whether the need to bring this work back 'in-house' suggests a flaw in the DPC approvals process at PR19 such that we may see other DPC projects scaling back, or whether this is simply a sensible one-off adjustment to a single DPC project.  Only time will tell.