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Water firms appeal regulator’s customer bill and investment orders

Paloma Kubiak
Written By:
Paloma Kubiak

Water companies are challenging Ofwat’s price review which forces them to cut customer bills and leakages, as well undertake a major package of investment.

In December, Ofwat set out its price review for 2020 to 2025, forcing water companies to reduce customer bills by an average of £50 (before inflation).

As part of a £51bn package of investment, they will also need to cut leakages by 16%, saving enough water to meet the needs of the population of Birmingham, Bristol, Cardiff, Leeds, Liverpool and Sheffield.

However, the Competition and Markets Authority (CMA) said following appeals from water companies, it will examine Ofwat’s price reviews. It added that firms which are unhappy with the regulator’s decision have until tomorrow (15 Feb) to tell Ofwat they want the case to be referred to the CMA.

Every five years Ofwat must decide how much money people should pay for their water and the level of service they should receive. It also considers a range of issues to ensure water companies serve their customers effectively by keeping bills low while continuing to deliver sustainable services now and in the future.

The CMA said it will need to form its own conclusion on the price controls for the individual companies that appeal.

This isn’t the first time firms have appealed. Bristol water appealed in 2014 and 2009, while Mid Kent Water and Sutton and East Surrey Water challenged the price review of 1999. In 1994, South West Water and Portsmouth Water appealed.

Kip Meek, CMA inquiry group chair said: “Everyone needs water, so it’s really important that customers’ bills are not set too high, but at the same time the water companies have enough money to deliver an efficient and high-quality service. The CMA will look closely at whether Ofwat’s decision strikes the right balance in this and other areas and will make changes if not.”

‘Major challenge for the sector to transform’

Rachel Fletcher, chief executive of Ofwat, said: “This price review lays down a major challenge for the sector to transform: introducing a demanding set of new performance targets backed by investment for the future, including £13bn dedicated for the environment and future generations. This is the greenest price review ever.

“Companies must become more efficient, and step up to deliver better services, lower bills and secure long-term resilience.

“We have been clear that shareholders’ rewards will only be earned through a new standard of operational excellence. Some investors have accepted this scale of ambition and change, but others need to face up to the new reality.

“We are ready to fully engage with the CMA, setting out our analysis and why we are confident this is the right settlement for customers, the environment, and companies.”