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The whole water cycle — abstract, treat and deliver clean water to every home, then collect, treat and return the wastewater to the environment. A regional monopoly that earns a return on its asset base, decoupled from the litres it moves. Pick a real utility below and follow it through the cycle, the regulatory model and a working returns model.
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Drag the sliders to see what earns the regulated revenue — the asset base and the allowed return, not the litres of water.
A water utility is a regional natural monopoly, so it doesn't charge a market price — a regulator sets its allowed revenue. The building blocks are the same the world over: a return on the asset base (the RAB or rate base) at an allowed cost of capital; recovery of depreciation; an opex allowance; and outcome incentives (leakage, pollution, supply). The revenue is decoupled from the litres delivered — and the RAB grows with a heavy capex programme (treatment, leakage, storm overflows, resilience). Water is more opex-heavy than electricity or gas networks, so margins are lower.
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See also the Cash-flow & DCF model for a generic water utility build-up.