Threatened with nationalisation, South West Water cuts bills by 15% – interesting!
“Under threat of nationalisation from a putative Jeremy Corbyn-led Labour government, Britain’s three listed water companies have agreed to the largest cuts in customer bills since privatisation by Margaret Thatcher 30 years ago.
The reductions will mean that households in the West Country will pay 15 per cent less at 2019 prices over the next five years. In the northwest of England, bills will fall by 11 per cent before inflation.
While the inflation link in water charges will mean bills will fall by less, new penalties for missing environmental and operational targets could mean suppliers having to cut household charges by even more as a means of compensating their communities.
Of the 17 water companies in England and Wales, three have made a fast-track agreement with Ofwat, the regulator, to set customer charges from April 2020 to March 2025.
The other 14 suppliers have been given a must-do-better notice by Ofwat. Having been told by the regulator to resubmit their plans and make them more ambitious, the 14 will be told by Ofwat in July whether their revised proposals are acceptable.
As there is no competition in the supply of water to households, the 17 suppliers are all local monopolies and as such are tightly regulated by Ofwat. However, critics of the regulatory regime, including MPs on both sides of the House of Commons, have argued that Ofwat has for too long allowed suppliers to put up prices without investing enough in, for instance, stopping leaks, which in some areas lead to 25 per cent of the treated water in the mains system going missing.
The three suppliers who have been fast-tracked by Ofwat for presenting credible business plans for the 2020-25 price review are, coincidentally, the three remaining stock market-quoted water companies: United Utilities, formerly known as North West Water, which serves 3 million homes from Cheshire to the Scottish border; Severn Trent, which serves 4.3 million customers in the Midlands; and South West Water, which supplies 1.8 million people in the West Country and is a subsidiary of Pennon Group.
Household customers of South West Water have long had the largest bills in the country. Ofwat has agreed with the group that those bills will fall before inflation by 15 per cent, or £77, from this year’s £527 average to £450.
However, South West Water has also agreed with Ofwat that if it does not clean up its act with the Environment Agency — it is the most regularly fined for pollution incidents — then it could face further cuts to the charges it makes.
United Utilities has agreed to a £49, or 11 per cent, cut in bills over the next five years but has been told it will have to cut charges more if it does not hit targets to reduce its leaks by 20 per cent.
Severn Trent is to cut bills by 5 per cent, or £16, over the five years. It has committed to more than halving the average time its customers are without water every year or face penalties.
Under Ofwat’s rules, bills will go up every year in line with CPIH, the consumer price index that includes housing costs, now running at 1.8 per cent.
The suppliers’ charges will get final clearance in December. David Black, the Ofwat director in charge of the process, said: “Our draft decisions for these companies show that investment in service and infrastructure can go hand in hand with more affordable bills.”
Source: The Times (pay wall)