Water regulator seeks £14 off household bills

Published 23rd Jul 2009

Ofwat, the body that regulates the water industry, has published proposals that would require water companies in England and Wales to cut the average household bill by £14, or 4 per cent, by 2015. The average home would then be paying £330 a year for water and sewerage services.

Every five years the companies make submissions to Ofwat on how much they should be allowed to charge customers. The submissions are all in, and this morning the regulator has published its proposals, which are significantly less generous than the industry wanted.

As a consequence, analysts believe the companies, which since privatisation two decades ago have been reliable providers of income to investors, may have to scale back payments.

In early trading on the stock market, share prices in water companies were marked back sharply. United Utilities fell 19.5p to 483p and Severn Trent 43p to 1,068.4p. Both are seen as especially vulnerable to pressure on their dividends because of their level of debt and the size of payments to shareholders. The OFT statement made it clear that under its proposals, the industry would be allowed only a 4.5 per cent return on capital, at the lower end of City expectations.


A final decision by Ofwat on how much companies can charge in the five years from April next year will be made in November after a further round of discussions with the industry and customers. The proposed reductions do not take account of inflation. Companies, which had hoped to be able to raise prices by £28 a year by 2015, are likely to lobby for smaller price cuts.

Regina Finn, the chief executive of Ofwat, said that the price cuts would still allow the industry to invest almost £21 billion over the five years. This would mean that the risk of flooding would be reduced for about ten million people and more than £4 billion spent on improving drinking water quality and providing cleaner wetlands, rivers and beaches.

Ms Finn said: "We understand times are hard, and we have listened to what customers have told us." She said that the proposals wuld allow "efficient, well-run companies" to invest. "We've reduced bills, whilst allowing extensive investment of almost £21 billion."

Several water companies in England have reported falling revenues since the recession bit because industrial and business customers, which are metered, have cut back on consumption.

Source: ' Times '

View All Latest Articles