Ofwat ruling on water bills will hit millions of unmetered homes

Published 27th Nov 2009

Millions of British households are facing rises of up to a third in their water bills over the next five years after Ofwat, the industry regulator, rowed back on its tough stance against the water companies.

Worst hit will be the more than 14 million households in England and Wales without a water meter. More than half a million unmetered South West Water customers can expect bills to rise by 29 per cent from £723 now to £935 by 2015. Its 1.1 million customers with meters face arise of only 1 per cent, to an average of £407.

The same pattern is reflected industry-wide as Ofwat throws its weight behind measures to encourage more frugal use of water. Millions of consumers without meters will see their bills rise by an average of 5 per cent from £367 to £385 by 2015 while the 10 million metered households will see their bills frozen at an average £311. Tony Smith, chief executive of the Consumer Council for Water, branded the steep price rises for unmetered households as “grossly unfair” and said that he planned to challenge Ofwat over them.

Details of the rises were contained in Ofwat’s five-yearly price review yesterday, which set the amount the 22 water companies in England and Wales can charge consumers and spend on upgrades to their pipe and sewerage networks from 2010 to 2015.

On balance, the settlement left the average UK water bill for the period unchanged at about £340 but that masked huge regional differences between suppliers and between metered and unmetered consumers, with those in the South West and North East particularly hard hit. At Northumbrian, more than one million unmetered customers are set for price rises of 12 per cent, from £335 to £375 per year by 2015, while prices for its 3 million metered customers will rise by only 5 per cent, from an average £267 to £280.

Richard Laikin, director of utilities at Ernst & Young, said the figures clearly illustrated that Ofwat was embarking on a “big push” to force through widespread adoption of water meters. He said the measures risked hurting vulnerable customers who would have problems paying.

Mr Smith added that it was unfair that unmetered customers were being forced to pick up the tab for the switchover. “We have big concerns about this,” he said, while adding that the huge disparity in prices was perverse.

Rob Ashley, Ofwat’s director of external affairs, acknowledged the regulator was keen to encourage water metering, which he said usually led to cuts of 5 per cent to 10 per cent in average water use. He said: “We are keen to encourage metering, particularly in water-scarce areas.” He admitted that the disparity was a “significant issue” likely to grow worse with time.

The ruling yesterday, which will permit the industry to spend £22 billion on upgrades between 2010 and 2015, also included provisions to increase the number of UK households using water meters from 37 per cent to 51 per cent over the same period. Northumbrian declined to comment on the detail of the ruling. South West Water could not be reached for comment.

Several companies are angry that the ruling was not generous enough for planned network upgrades. They include Thames Water, which is thought to be considering a challenge with the Competition Commission. Other companies fear they may be forced into dividend cuts or rights issues. Regina Finn, Ofwat chief executive, said: “This level of investment can be done by well-managed companies, while ensuring their customers get a good deal and shareholders a fair return.”

Source: ' Times '

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