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The Competition Commission today accepted that the proposed merger of Mid Kent Water Limited and South East Water Limited will reduce Ofwat's ability to make comparisons between individual companies – a vital part of its work in determining the size of customer bills. The Commission said that Ofwat may be expected to set less challenging targets for the water companies across England and Wales, which is likely to lead to higher prices for customers. However, Ofwat has pledged to continue to robustly challenge companies' costs to keep customers' bills down. The limited price reduction that the Competition Commission has proposed will provide a one-off payment of less than £5 to the customers of these two companies. Additionally the merged company will be required to have a £3.1million reduction to its operating costs built into its price limits at the next price review in 2009. Ofwat will work with the Competition Commission and the companies to implement the remedies which are designed to go some way to offsetting the permanent loss of an independent comparator. Notes to Editors: 1. The Water Services Regulation Authority (Ofwat) is the economic regulator of water and sewerage companies in England and Wales. It exercises its powers in a way that it judges will allow companies to carry out their functions properly, and finance them. Its duties include protecting the interests of consumers, wherever appropriate by promoting effective competition. 2. The reference test: Under the Water Industry Act 1991 (as amended by the Enterprise Act 2002) the Office of Fair Trading has a duty to make a reference to the Competition Commission if the OFT believes that it is or may be the case that a merger of two or more water enterprises has taken place or arrangements are in progress which would rsult in such a merger. The duty does not apply if the value of the turnover of the water enterprise being taken over or the value of the turnover of each of the water enterprises belonging to the person making the takeover does not or would not exceed £10million. 3. The statutory questions the Competition Commission has to answer in respect of the merger are: (a) whether a water merger has taken place; and (b) if so, whether that merger has prejudiced, or may be expected to prejudice, the ability of the Water Services Regulation Authority (Ofwat) in carrying out its functions by virtue of the Water Industry Act 1991, to make comparisons between diferent water enterprises. 4. Ofwat's initial submission on the merger and subsequent submission on the proposed remedies is available on the Ofwat website, www.ofwat.gov.uk 5. Media enquiries to Ofwat Press Office on 0121-625 1442/1416/1496/1322. Out of hours media enquiries to Ofwat on 0121-625 1300.  | ||||||
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