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Media centre
Ofwat today set out for Ministers its concerns about the implications for customers of the coming review of water company price limits. Ministers are to give their main guidance to Ofwat early in the New Year on the scale and scope of the environmental and other quality improvements which water companies will have to carry out and which customers will have to pay for in the period 2005-10. In his letter to Environment Secretary Margaret Beckett, Philip Fletcher, the economic water regulator, spelt out the potential for significant price increases. Half of the net increase in customer bills, using figures contained in the companies' draft business plans, relates to environmental and other quality improvements. Following Ofwat's discussions with the companies on their draft business plans, the range of the investment programme to improve drinking water quality and the environment has been costed. This would add between £7.1 billion and £13.4 billion to the very large post-privatisation capital investment programme for which customers are already paying in their bills. Companies will also need to invest a considerable amount to maintain assets, ensure security of supply and make progress to resolve sewer flooding problems. Customer research, jointly commissioned by price review stakeholders and published earlier this week, has shown that while many customers may be prepared to pay more to maintain services and provide improvements, they become much less willing to do so as the costs rise, and one in ten customers said they could not afford the proposed price increases. Philip Fletcher has taken preliminary account of the conclusions and recommendations of the Water Pricing report published yesterday by the Environment, Food and Rural Affairs Select Committee. He notes and shares the concerns expressed by the Select Committee, by WaterVoice, who represent water customers, and others about the pressure which increases in price limits would place on low-income customers. Philip Fletcher said: "It is too early to say what the outcome of the review will be. In the New Year we shall receive Ministers' principal guidance on the quality improvement programmes. And in April companies will submit their final business plans which we shall scrutinise closely before we set draft price limits in July. "Hard choices will have to be made about the scale of the obligations that companies will be expected to carry out if we are to set price limits that are recognised by customers as appropriate and necessary." Notes to Editors: 1. Philip Fletcher, 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. WaterVoice represents customers' interests. 2. Ofwat will set final price limits in November 2004. These will take effect from April 2005. 3. The public letter, 'Advice to inform the principal guidance on scale and timing of further quality enhancements', will be available on the Ofwat website on www.ofwat.gov.uk or from the Ofwat library on 0121 625 1373. 4. Ofwat this week published the latest studies into the scope for further efficiency savings from water companies. These are available on the Ofwat website. 5. The range of the quality investment programme costed is based on: · Reference plan A - a fully worked up draft business plan including a defined package of quality and environmental improvements with prescribed reference level assumptions for cost of capital, the scope to reduce costs through efficiency, the rate of take-up of free meters, and forecast inflation; and · Reference plan B (for the water and sewerage companies and Three Valleys Water) which also includes a fully worked up draft business plan but with a larger defined package of improvements with the same reference level assumptions. MEDIA ENQUIRIES TO OFWAT PRESS OFFICE ON: 0121 625 1416/1496/1442 Out of hours enquiries to pager: 08700 555 500 water 503/509. Ofwat publications and press notices can be found on Ofwat's website at: www.ofwat.gov.uk  | ||||||
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