Water chiefs face an Ofwat crackdown on prices

Published 20th Jul 2009

Water companies could face price curbs under a five-year plan to be unveiled by Ofwat this week. The regulator is expected to reject executives' demands for big rises and insist that the cost of water to consumers does not rise in real terms until 2015.

Water bills have more than tripled since privatisation in 1989, rising faster than inflation and the rate of increase in other utilities.

Industry sources said that Ofwat, whose plans for pricing will be published on Thursday, is keen to make water companies play their part in helping recession-hit consumers. The regulator's chief, Regina Finn, has called the economic situation a 'very crucial and uncertain time'.
Price war: Ofwat is cracking down on the prices charged by water companies


Water companies had been hoping to increase prices by five percent next year and 2.5 per cent over the whole of the next five years, with many counting on the rises to fund capital spending on water and drainage infrastructure. The Retail Prices Index, Ofwat's preferred measure of inflation, is at minus 1.6 per cent.

Industry executives insist they need every penny they can raise.

'It's for things like Thames Water in London repairing Victorian sewers or the project to stop sewage flowing into the Thames during heavy rains,' said one.

The average household pays £342 a year for water and waste, with bills rising 4.1 per cent this year. Average bills in the South-West are the highest at £450 a year while those of Thames Water are the lowest at £280.

Water companies say prices must rise because of higher corporate taxes, steeper debt recovery costs and heavier pension costs. At the same time, the slump in housebuilding has cut demand for new water pipes.

Ofwat, which refused to comment ahead of the review, is also expected to order water and waste companies to cut capital spending plans.

Some analysts estimate that the cuts could be as much as 20 per cent over the next five years from the planned £22.5billion - nearly a fifth more than in the previous five years.

The proposals from Ofwat are draft plans with a final recommendation due in November.

Source: ' Daily Mail '

View All Latest Articles