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Ofwat begins public consultation today on its provisional decision to reject a bid by Anglian Water for a price increase from April 2004. The company had sought to increase water bills for the remaining 12 months of the current five year price review period. But, following scrutiny, Ofwat believes that it would be entitled to reduce the prices Anglian Water may charge customers from April 2004 by 2.4 per cent in real terms from the amount determined at the 1999 price review. This would mean that the average bill for domestic customers would be £279 from next April, compared with the £285 assumed in 1999. However, Ofwat sees potential benefits for customers in smoothing the transition from current bill levels into the new price review period from April 2005. Accordingly, Ofwat is also consulting on a proposition which would leave unchanged the price limit for April 2004, and offset a further reduction against prospective price increases from April 2005. Ofwat is now seeking the views of the company, water customers, and other interested parties. Anglian said it has faced extra costs because of:
Although Ofwat found that some of the claim is justified, we noted that Anglian Water had benefited from funding in the 1999 review for work that will no longer be completed on cryptosporidium treatment and from changes to the way the company disposes of sludge. The cryptosporidium change would take the Anglian claim below the level of materiality which justifies a price increase. Adding the sludge change would justify a reduction in prices, notwithstanding the additional costs. Director General of Water Services, Philip Fletcher, said: "We have looked closely at the company's claim. Taking into account the funding the company received for work no longer required, as well as their extra costs, we believe customers should, in fact, benefit from lower bills. " Anglian's revised strategy for dealing with sludge has changed significantly from that envisaged and funded at the 1999 review. We will work closely with the company to understand fully its altered approach before we make a final decision next month. "I have a responsibility to ensure that efficient water companies can finance the services they provide to customers. But customers should not have to pay more than is necessary. The regulatory process allows me to reduce prices for customers if a company does not deliver expected outputs funded at the last periodic review. "I see some potential advantage in deferring until April 2005 the reduction in prices due to the changed approach to sludge treatment. Customers would still receive the full benefit of the reduction by setting it against price increases that may be needed in that year at the start of the new periodic review period. "I will carefully consider comments from customers, the company and other stakeholders on these draft proposals before I make my final decision." Ofwat sets price limits for water companies every five years and last set price limits in November 1999 for the period 2000-05. It will announce price limits for 2005-10 next year. The public consultation period on Ofwat's decision on Anglian's current application will run until 3 December. The final decision will be announced on 11 December. Comments can be sent to Ofwat at Centre City Tower, 7 Hill Street, Birmingham B5 4UA. or email kieran.duffy@ofwat.gsi.gov.uk. Alternatively customers can make their views known to the consumer watchdog WaterVoice at Carlyle House, Carlyle Road, Cambridge CB4 3DN, or (in the case of Hartlepool customers) Northgate House, St Augustine's Way, Darlington DL1 1XA. 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. Customers' interests are represented by WaterVoice. 2. Price limits were set on 25 November 1999 for all the water and sewerage companies in England and Wales. They came into effect from 1 April 2000. Copies of 'Final Determinations: Future water and sewerage charges 2000-05' are available on Ofwat's website: www.ofwat.gov.uk and from Ofwat's library (0121 625 1373). 3. A letter to Anglian Water explaining Ofwat's decisions will be available on our website: www.ofwat.gov.uk 4. Price limits are set using the formula RPI+K, where K is the number by which the company can change its charges to customers above, or below, the level of inflation. The price limits for Anglian Water are: PRICE LIMITS %
AVERAGE BILLS 2004/05
5. Hartlepool Water is owned by Anglian Water. This change in price limits affects Hartlepool's customers' water bills but not their sewerage bills, as this service is provided by Northumbrian Water. 6. Condition B of their licences allows companies to apply for an adjustment of their price limits for certain relevant changes in circumstances affecting costs that, in total, over a number of years, exceed 10 per cent of their turnover. Ofwat can also serve a counter notice if the regulator has evidence that companies have been allowed to raise money for work that may no longer be needed, or has not been carried out. 7. After the final determinations, Ofwat named three areas that allowed companies to apply for interim determinations. These included the consequences (debt-recovery costs and bad debt) of removal of companies' right to disconnect domestic customers for non-payment. 8. Following a similar process earlier this month Ofwat announced provisional decisions to increase price limits for United Utilities and Northumbrian Water.Last year Ofwat increased price limits for Severn Trent Water and Yorkshire Water Services. In 2001, Ofwat increased price limits for South West Water, Bournemouth & West Hampshire Water and Dee Valley Water. MEDIA ENQUIRIES TO OFWAT PRESS OFFICE ON: 0121 625 1442/1416/1496. Out of hours calls to: 08700 555 550 ask for pager 'water 503/509' Ofwat publications and press notices can be found on our website at: www.ofwat.gov.uk  | |||||||||||||||||||||||||||||||||
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