Water rates set to rise

Thursday, 5 August 2004 12:00 AM

Draft proposals from the water regulator Ofwat would see water bills in England and Wales rise by 13 per cent over the next five years, half the amount water companies asked for.

Average household bills will be up by £33, compared with the companies' proposals for a £70 rise.

The final water prices will be set on December 2nd after a period of consultation with companies, Government and consumers. They will take effect from April 1st 2005, with proposals for Scotland due to be announced separately.

Ofwat said that the new pricing structure will ensure that all essential services are safeguarded, there is safe and reliable drinking water, and there is major investment in environmental protection.

It claims that the price rise is sufficient to allow efficient companies to carry out all necessary functions, and that Ofwat believes that all companies will continue to improve their efficiency performance.

The director general of Ofwat, Philip Fletcher, said: "We believe these decisions are fair to customers and the companies, and will benefit the environment. They will enable efficient companies to carry out and finance their services and meet new obligations."

Explaining the thinking behind Ofwat's price assessments, Mr Fletcher said: "We have made realistic assumptions about the prospects for further efficiency gains. We have also taken account of unavoidable cost pressures on the industry.

"We have made our assumptions on a consistent basis for all companies, recognising their need to raise finance in the markets for major investment programmes."

He emphasised that 94 per cent of the schemes put forward by companies to enhance the environment and quality of drinking water have been accepted and 80 per cent of those to tackle sewer flooding in homes.

The Welsh Environment Minister, Carwyn Jones, has already expressed concerns about the proposals. She said: "I remain very concerned about the scale and impact of these price rises, especially for those customers who are least able to pay.

"And I am disappointed that - even after Ofwat scrutiny - the level of increases, and the bills which most Welsh consumers will pay for their water remain amongst the highest."

The chief executive of Water UK said that Ofwat was making "challenging" assumptions and had "ambitious aims" about how quickly and cheaply water companies could complete their projects.

Pamela Taylor said: "The companies have worked closely with customers in building up their business plans. Above all, they want to be sure they can supply the services customers want in the framework of Ofwat's challenging assumptions about cost."

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