UK householders have been denied steep cuts to their yearly water bills after Ofwat, the water regulator, today published proposals to reduce prices by £3, after original plans to lower rates by £14.
Under recommendations for prices over the next five years, to be implemented across 22 companies, the average water bill will fall to £340. In July, Ofwat proposed draft reductions that would have cut the average yearly bill to £330.
Since publication of the draft recommendations, Britain's water companies have been lobbying Ofwat, complaining that steep price cuts would harm their ability to maintain and invest in their networks, and could force them to raise fresh capital from investors or cut their dividends.
While the average reduction in prices across Britain's 22 water and sewerage companies is £3, there are huge variations across different regions - by the end of 2015, Thames Water's prices are expected to remain flat, but customers of Essex & Suffolk Water, which is controlled by Northumbrian Water, will see their annual rates rise by £9, or up by 15 per cent.
Steve Bloomfield, head of utilities for Unison, the union, said today: “The fact that water prices will be frozen for the next five years will be welcomed by many people. But we think that Ofwat could have gone further by offering help to vulnerable people, who are already struggling to pay their bills."
The Consumer Council for Water said that it would give Ofwat a mark of "seven out of ten" for its final decisions on water price limits.
It said that although there was some good news for water customers, since average bills will stay about the same, it was concerned that the regulator had eased off on water companies’ efficiency targets – causing higher bills for some water customers.
The council added that today's announcement suggested that Ofwat had been arguably unrealistic in its draft decisions back in July.
Regina Finn, Ofwat’s chief executive, said: "People can shop around for the best deal on many things, but not water. Our job is to do this for them. Customers have told us that they want us to keep water and sewage charges flat while maintaining a safe, reliable supply of water. That's what we've delivered.”
The regulator’s decision will see more than £22 billion invested in maintaining and improving services to customers, with household bills remaining broadly flat until 2015.
The City welcomed the better than expected ruling, with shares in all the major water companies rising. Severn Trent gained 38p to £10.44, United Utilities rose 8.6p to 492.7p and Northumbrian Water was up 14.2p at 270.1p.
Peter Atherton, a utilities analyst for Citigroup, said that the final ruling was positive, compared with the draft. Lakis Athanasiou, an analyst for Evolution, said that he no longer expected any rights issues from the sector.
The companies now have until January to decide whether to appeal against the ruling to the Competition Commission.
David Owens, chief executive of Thames Water, said: "We will be examining Ofwat's final determination carefully over the coming weeks in order to fully understand its implications for our customers and our business."
John Cuthbert, managing director of Northumbrian Water, said the proposed price limits were just one part of a detailed pack of information provided by Ofwat and that the group needed to consider the detail carefully before reaching a conclusion on the final determination.
United Utilities said that it would consider the regulator's final proposals carefully before responding.
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