PN 33/05: Water companies respond to incentives to be more efficient

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PN 33/05	20 December 2005
Water companies respond to incentives to be more efficient

An Ofwat report published today shows that water companies in England and Wales continue to make efficiency improvements.

The 'Unit costs and efficiency report 2004-05' compares all 22 water and sewerage companies on the basis of how efficiently they run their businesses day-to-day and how efficiently they spend money on the maintenance of pipes, sewers and treatment works.

It found that:

Four companies – Bournemouth & West Hampshire, Cambridge, Portsmouth and South Staffordshire – achieved the top bands for water service efficiency;
Thames and Yorkshire achieved the top bands for sewerage service efficiency; and
During the five-year period (2000-05) the water industry outperformed Ofwat's assumptions on costs and efficiency for the 2000 to 2005 period, despite some increased costs towards the end of the period, e.g. pensions and energy.

Ofwat used for the first time a group of smaller water companies – Portsmouth, South Staffordshire, Dee Valley and Cambridge – to set the benchmark for assessing the relative operating efficiencies of companies providing water services.

Philip Fletcher, Director General of Water Services, said:

"The strong incentives we put in place when we set price limits encourage all companies, including the top performing, to squeeze efficiency further and produce even better value for money year on year. The benefits of further efficiency savings will be passed on to customers in future."

Notes to Editors:

1. The Director General of Water Services is the economic regulator of the water and sewerage companies in England and Wales. He exercises his powers in a way that he judges will allow them to carry out their functions properly, and finance them.
2. The 'Unit costs and efficiency report 2004-05' is available from the Ofwat website www.ofwat.gov.uk and from the Ofwat library on 0121 625 1373.
3. Companies' efficiency performance is banded from A to E (A being the most efficient).
4. We assess relative operating and capital maintenance efficiency separately for water and sewerage services.

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