PN 08/14 Ofwat draft decisions keep bills down

29 August 2014

Draft proposals by Ofwat, published today, mean average bills for water and wastewater customers would fall by around 5% in real terms between 2015 and 2020.

At the same time customers would see better levels of service. This would be supported by a substantial investment programme – worth more than £43 billion – or almost £2000 for every household in England and Wales. The benefits this investment would bring include a reduction in the time lost to supply interruptions (down 40% on average), cleaner water at more than 50 beaches, and more than 340 million litres a day saved by tackling leakage and promoting water efficiency – enough water saved to serve all of the homes in Birmingham, Liverpool and Leeds.

Ofwat has changed its approach to setting prices to put the onus on companies to take responsibility for understanding what their customers want and can afford. As a result, when companies submitted their plans to Ofwat in December, all but two were already proposing bills that were either held at, or below, inflation. Ofwat’s challenge has further reduced bills for all companies. For example, its scrutiny of companies’ financing costs would save customers more than £2 billion over the next five years.

Cathryn Ross, Chief Executive of Ofwat said:

“This is good news for customers – with bills held down and better service. Our challenge to companies has resulted in the sector’s biggest ever customer conversation. Delivering for customers rather than ticking regulatory boxes will drive what companies do over the next five years. Some will find this tough, but companies which really stretch themselves will reap the benefits of increased customer trust and confidence.”

Sonia Brown, Chief Regulation Officer said:

“Some companies provided excellent, customer-focused plans. Others did not include sufficient evidence to justify their plans, and so we stepped in to make sure customers get a fair deal. These are draft decisions and things could still change. Companies will be looking hard at where they need to submit new evidence and we will also continue to challenge hard to make sure that our final decisions result in the best possible deal for customers.”

There now follows a period of consultation when companies and other stakeholders can make representations. Final decisions will be published in December.

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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. Ofwat sets limits on charges for water and wastewater services every five years. The consultation on these draft determinations closes on 3 October. Final determinations will be published on 12 December 2014.
  3. After Ofwat’s final determinations in December, it is for companies to decide each year the level at which they will set charges for customers consistent with Ofwat’s final determinations. The first charges companies will set consistent with its final determination will be in April 2015. Further company specific details of bill changes are available on www.ofwat.gov.uk
  4. In addition to a positive or negative allowance from Ofwat, companies can raise their water bills in line with inflation (RPI) on a year-by-year basis.
  5. Ofwat has already consulted on draft determinations for four companies – Affinity Water and South West Water, Northumbrian Water and Welsh Water.
  6. Water and sewerage companies have directly engaged with more than 250,000 customers during this price review process. This review has also seen the creation of customer challenge groups – independently chaired panels made up of a cross section of customers and their representatives to challenge whether companies’ plans properly reflect customers’ views.
  7. The overall figure for average bill movements includes bill changes for the 18 companies that serve England and Wales. The figure includes the current assessment for efficient costs for the preparatory works for the Thames Tideway Tunnel – a 22km sewer to deal with the problem of too much sewage overflowing into the river Thames. However, it does not include costs for the construction of the tunnel. This is because the project will be financed and delivered by an independent infrastructure provider (IP). The IP is due to be appointed in 2015.
  8. This release may be of interest to those following these companies: Affinity Water, Anglian Water Services Ltd, Bristol Water plc, Cholderton and District Water Company Ltd, Dee Valley Water plc, Dŵr Cymru Cyfyngedig (Welsh Water), Northumbrian Water Ltd, Portsmouth Water plc, Sembcorp Bournemouth Water Ltd, Severn Trent Water Ltd, South East Water Ltd, Southern Water Services Ltd, South Staffordshire Water plc, South West Water Ltd, Sutton & East Surrey Water plc, Thames Water Utilities Ltd, United Utilities Ltd, Wessex Water Services Ltd, and Yorkshire Water Services Ltd.
  9. Media enquiries to Benedict Fisher on 0121 644 7642 / [email protected]