Capita plc (CPI) has issued a regulatory response after Ofgem opened a consultation proposing to disallow costs of up to £24m relating to the Smart Data Communications Company (DCC) contract for the regulatory year 2025/2026. The proposed disallowance represents a reduction from the £31m draft disallowance issued for the prior year 2024/2025. Capita's subsidiary, Smart DCC Limited, intends to engage with Ofgem during the consultation period to seek a reduction in disallowed costs, with a final price determination expected in Q1 2027. Investors will be watching the outcome of that consultation closely given the financial implications for the regulated contract.

Key Points

  • Capita plc (CPI) — AI-enabled business services provider operating across public and private sector clients in the UK
  • Ofgem has opened a consultation proposing to disallow costs of up to £24m for Smart DCC Limited for regulatory year 2025/2026
  • The draft disallowance of £24m compares with a prior-year draft disallowance of £31m; final determination is expected in Q1 2027
  • Investors should watch the outcome of Smart DCC Limited's engagement with Ofgem ahead of the Q1 2027 final determination

Ofgem Proposes £24m Draft Cost Disallowance for Smart DCC's 2025/2026 Regulatory Year

Ofgem has opened a formal consultation proposing a draft price disallowance of up to £24m for Smart DCC Limited, Capita's wholly-owned subsidiary responsible for managing the Smart Data Communications Company contract. The announcement states this draft disallowance relates to the regulatory year 2025/2026. For context, the equivalent draft disallowance for the previous regulatory year 2024/2025 was £31m, suggesting the provisionally proposed level of disallowed costs has decreased year-on-year, though the consultation process means the final figure remains subject to change.

Smart DCC Limited to Engage Constructively With Ofgem Before Q1 2027 Final Determination

Capita's announcement states that Smart DCC Limited will engage constructively with Ofgem during the consultation period, with the objective of seeking a reduction to the level of disallowed costs. This engagement forms part of the usual regulatory framework governing the Smart DCC contract and is consistent with the approach taken in previous years. The final price determination is expected to be issued in Q1 2027. Smart DCC Limited is a wholly-owned subsidiary of the Capita group but is not consolidated into the group's financial statements, as detailed in note 4.7 of the group's 2025 Annual Report and Accounts.

Capita's Smart Meter Network Covers 39.2 Million Meters Across 23 Million UK Homes and Businesses

Since the inception of the DCC licence, Capita states it has built a significant national network connecting more than 39.2 million smart meters across 23 million homes and small businesses throughout Great Britain. The network supports smart meter monitoring, which the company describes as playing a role in addressing energy affordability challenges. As previously announced by Capita, the licenced business has recently transitioned to a not-for-profit service provider model, a structural change that may influence how future regulatory determinations are assessed by Ofgem.

Inside Information Disclosure Reflects Regulatory Significance of Ofgem's Consultation for Capita

Capita has classified this announcement as containing inside information under Article 7 of the UK Market Abuse Regulation, as incorporated into UK domestic law via the European Union (Withdrawal) Act 2018. Publication via a Regulatory Information Service brings the information into the public domain. The classification underlines the materiality of the Ofgem consultation to Capita as a listed company. Capita describes itself broadly as an AI-enabled business services partner, working with organisations across central and local government and regulated industries, with millions of people relying daily on services it supports.