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Ofwat is examining an application from Sutton and East Surrey Water to raise the prices it charges customers in 2009-10. Under the terms of its licence, the company can ask Ofwat to review its prices to customers if it believes that an unforeseen circumstance, which could not have been avoided by prudent management action, is having a substantial effect on its financial position. Sutton and East Surrey Water says that it has experienced:
Regina Finn, Ofwat Chief Executive Officer, said: "We are very concerned to see Sutton and East Surrey Water looking for permission to increase their customers' bills substantially in 2009-10. "The process of examining this application will now start. The onus is on the company to convince us that its customers should face higher bills. Any price increases must be fully justified in the light of Sutton and East Surrey's financial circumstances." Ofwat will scrutinise the company's application and consult on its draft decision in early November. It will announce its final decision in December. Any changes to prices will apply to water bills from April 2009 and will be taken into account when Ofwat sets prices for the company for 2010-15. 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 protect the interests of consumers, promote value and safeguard future water and sewerage services by allowing efficient companies to carry out their functions properly, and finance them. 2. Sutton and East Surrey Water is a water-only supplier, providing water to parts of Surrey, Sussex, Kent and the London boroughs of Merton, Sutton and Croydon. It supplies 257,000 domestic properties and around 19,000 non-domestic properties. 3. 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. 4. Price limits were set in December 2004 for all the water and sewerage companies in England and Wales for the period 2005-10. They came into effect from April 2005. Copies of Final Determinations: Future water and sewerage charges 2005-10 are available here.
5. Condition B of their licences allows water companies to ask Ofwat to review its price limits if it believes that an unforeseen circumstance is having a substantial effect on its financial position. For Ofwat to consider the request the company must show that the: a) Net present value of the losses calculated over 15 years exceeds 20 per cent of turnover of the appointed business; and b) Losses could not have been avoided by prudent management action. Ofwat will take account of the net effect of the unforeseen circumstance. 6. In August the company published its draft business plan. In this it proposes price limits for each year 2010 to 2015. These proposals may need revisiting in the light of the outcome of this application. 7. Media enquiries to Ofwat Press Office: contact Steph Beeby on 0121 625 1416 Email: pressofficeteam@ofwat.gsi.gov.uk  | ||||||||||||
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