Interviewer view · keep this screen to yourself

Building a regulated water bill from its blocks

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

Riverbend Water (a fictional company in England) has a regulatory capital value of GBP 10 billion. The regulator allows operating costs of GBP 800 million a year, run-off (depreciation) of GBP 400 million a year and a return of 4.03 percent a year. It bills 2.5 million households. What is its allowed revenue, and the average bill per household? Then recompute the bill with a return of 4.20 percent.

2. Answers to clarifying questions

This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.

3. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

Allowed revenue = operating costs + run-off + allowed return x asset base
- Return on capital = asset base x allowed return
- Allowed revenue = operating costs + run-off + return on capital
- Average bill = allowed revenue divided by households billed

4. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: Return on capital
What a strong candidate does: 4.03 percent of GBP 10,000 million.
Return on capital (GBP million): 10,000 × 0.0403 = 403
Step 2: Allowed revenue
What a strong candidate does: GBP 800 million plus 400 plus 403.
Allowed revenue (GBP million): 800 + 400 + 10,000 × 0.0403 = 1,603
Step 3: Average bill
What a strong candidate does: GBP 1,603 million over 2.5 million households.
Average bill (GBP per household): 1,603 ÷ 2.5 = 641
Step 4: Bill with a 4.20 percent return
What a strong candidate does: The return becomes GBP 420 million, so revenue is GBP 1,620 million.
Average bill at 4.20 percent (GBP per household): (800 + 400 + 10,000 × 0.042) ÷ 2.5 = 648

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

Riverbend's bill of about GBP 641 a household is mostly set by the regulator, so its profit plan should focus on beating the cost allowances and on the return, not on price. First, the return on capital is GBP 403 million of the GBP 1,603 million, so a change of 0.17 points in the allowed return moves the bill by about GBP 7. Second, every GBP 1 million saved below the operating allowance adds to profit until the next review. The risk is fines for leaks and sewage spills. As a next step, compare its cost per household with the most efficient companies.

Risks a strong answer names: Missing performance targets (leaks, pollution) brings penalties; Heavy borrowing makes the company fragile if interest rates rise, as the case of Thames Water showed.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.