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PN 34/08 | 22 October 2008 |
Water industry "on notice" to justify spending |
Speaking this morning on BBC Radio 4's The Today Programme, Ofwat's Chief Executive says that the water industry is "on notice" to justify the money it is proposing to spend.
In the interview Regina Finn warned that the regulator would not tolerate complacency, as it challenged water companies' proposals to increase prices to help fund capital investment programmes.
Water companies in England and Wales propose increasing the average customer bill by around nine per cent more than inflation between 2010 – 2015.
Ms Finn said
"In these tough times, clearly it is important that bills are kept under control."
"We are challenging these proposals and the water companies are on notice that they will have to justify every single penny of customers' money that they wish to spend."
The interview preceded the publication today of Ofwat's Service and delivery report, which scrutinises how the companies performed in 2007-08 in delivering services to customers in England and Wales.
It shows that although water companies are generally hitting their performance targets, there is still room for improvement across the industry.
For example, all water companies have hit their leakage targets for the first time. This is set against last winter's mild weather, and there is still more to be done.
The industry leaked 3,291 megalitres of water a day in 07/08. This would be enough water to fill the bowl of the new Wembley stadium almost three times every day.1
Commenting on the report Ms Finn said:
"The water companies are getting better. Yet in terms of the progress what we are seeing is small steps up a steep hill. This is no time for complacency.
"We want to ensure that customers receive consistent quality of supply at reasonable prices. We believe increasing competition will be the key to meeting these challenges."
"With an increasing population and the impact of climate change we need to think differently about how we manage our water."
Ofwat's climate change policy set out that the industry faces unprecedented challenges adapting to a changing climate. Recent predictions suggest wetter winters and drier, warmer summers, raising the potential twin challenges of flooding and supply shortages.
The report shows that seven companies' water supply levels mean that they would implement a hosepipe ban on average once every ten years; more than half the companies work on the assumption of a ban once every 20 years. Folkestone and Dover Water has already been granted "water scarcity status."
Notes to editors
1. The new Wembley Stadium bowl is estimated to be 1,139,100 m3. This equates to 1139.1 megalitres. Leakage figures for 2007 /08 were estimated to be 3,291 megalitres / day. Therefore you could fill 2.89 Wembley Stadiums a day.
2. 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 allow companies to carry out their functions properly, and finance them. Its duties include protecting the interests of consumers, wherever appropriate by promoting effective competition.
3. Since privatisation in 1990, the water and sewerage sectors in England and Wales have invested approximately £75 billion. This equals average annual capital investment of more than £4.2 billion, compared with an equivalent investment figure of about £2 billion a year during the 1980s.
4. One of Ofwat's main tasks is to set price limits for the water and sewerage companies in England and Wales. Ofwat does this in order to protect consumers from the monopoly providers of these services. Ofwat reviews price limits every five years. Prices were set at the price review in 2004 for the 2005 – 2010. The next price review (PR09) covers the five years from April 2010. Further information is available here.
5. Water companies have proposed price increases which would raise the average bill to £355 before inflation in 2015 from £326 in 2009. Companies propose these increases to help fund a capital investment of £27 billion in the industry over the five year period, and address the issue of increased operational cost, including rising energy prices.
6. Media enquiries to the Ofwat Press Office:
Benedict Fisher on 0121 625 1442 / benedict.fisher@ofwat.gsi.gov.uk
Or
0121 625 1416/1496 / pressofficeteam@ofwat.gsi.gov.uk
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