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Thames Water seeks permission to hike prices

Tahmina Mannan
Written By:
Tahmina Mannan
Posted:
Updated:
12/08/2013

Thames Water has asked its regulator, Ofwat, for permission to increase prices by nearly £30.

The UK’s largest water company wants to put up prices by 8%, adding £29 to the average household bill. 

The company said the price hike is necessary due to changes in costs that were not anticipated by Ofwat back in 2009, when the regulator had set a limit on prices for the period of 2010-2015.

The company said that the need for a price rise is due to ‘bad debt’, where its customers failed to pay their bills due to the economic downturn, increases in Environment Agency charges; the costs of operating and maintaining the additional 40,000 km of sewers that were transferred to Thames Water by the Government in October 2011; and the costs of land acquisition and other preparatory work required for the construction of the Thames Tideway Tunnel.

The regulator’s 2009 decision meant Thames already has an allowance to increase its charges by 1.4% above inflation in 2014/15.

Thames Water said the price increase will be charged as a one-off payment. The current average Thames household bill is around £354. 

Regina Finn, Ofwat chief executive, said: “We know that household incomes are becoming ever more stretched – nobody wants to see any unnecessary increase in bills. We have made it clear to companies that we expect them to talk to their customers, listen to them and take account of their customers’ views.

“We will challenge these proposals and question the company strongly on their reasons. Proposed increases will only be allowed if they are fully justified.”

Stuart Siddall, chief financial officer for Thames Water said: “Ofwat resets price limits for each water company every five years, most recently in 2009, based on the best information available at the time. Then, during the five year period, almost all changes to costs and revenues, whether upwards or downwards, are up to us to manage. These include the costs of dealing with severe weather, changes to financing, employment, energy and chemical costs, business rates and tax.

“However, at the beginning of a five year period there are always a small number of potentially significant costs and revenues that can be clearly identified but not quantified. These are set out at the time of the price review and either the company or Ofwat can seek an adjustment, upwards or downwards, once the actual costs and revenues are known. That is what we are doing now.”

Ofwat said it expects to make a final decision by November 2013.

Any revisions to price limits would not apply to customers’ bills before April 2014.