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Last Updated: Thursday, 28 August, 2003, 11:21 GMT 12:21 UK
Firms plead for higher water prices
Water bills are likely to rise
The bosses of the UK's major water companies have asked the regulator for an inflation-busting price increase.

The companies have said that an average price increase of 15 a year is necessary in order to fund vital maintenance work.

The companies have warned that, without the extra investment, the water industry could face infrastructure problems similar to those that have dogged the railways.

Consumer groups have condemned the prospect of a price rise, saying that customers have already funded substantial infrastructure work.

Price cap

Pamela Taylor, chief executive of Water UK - the body representing water firms - has outlined a range of price increase proposals.

Ms Taylor said that average prices needed to rise by 75 over the next seven years, from 240 in 2004 to 315 in 2010.

However, Ms Taylor emphasised that every company has different needs and as a result some customers may see price increases of up to 35 a year while others will have to find only an extra 6.

The water firms' plans for price rises will have to be approved by Ofwat, the industry regulator.

Ofwat is expected to take up to a year to decide on what prices water firms can charge.

To compare the UK water industry to Railtrack is extremely misleading
Maurice Terry, Water Voice
The new price regime will come into operation from 2005 and last until 2010.

Previously, the regulator has taken a tough line with water companies, imposing a strict price cap.

Ms Taylor recognises that the Water UK statement is nothing more than an opening gambit.

"The estimates are a starting point. Their relationship to the bills after 2005 depends on decisions yet to be taken. What we're really doing today is starting a debate," Ms Taylor said.

Railtrack comparison

Recently, the bosses of several UK water firms warned that further steps to curb price rises could damage plans for vital maintenance work.

Bob Armstrong, chairman of Water UK, warned that there could be a Railtrack-style crisis unless old pipes are replaced.

In some areas, senior water executives have warned that prices would have to rise by more than 10% in order to pay for pipe replacement and other works.

According to the water regulator, Phillip Fletcher, prices are not expected to rise across the board as the water infrastructure in some parts of the UK is better than in others.

Ms Taylor said that the water industry proposed to increase investment in new plant and pipes by 21bn between 2005 and 2010.

In addition, Ms Taylor warned that the amount earmarked for investment could easily rise and bills likewise.

But Maurice Terry, chairman of consumer group Water Voice, is critical of the frims' argument that they need to charge more.

"Consumers have already paid out some 50bn towards infrastructure improvements and the system is in a good state. To compare the UK water industry to Railtrack is extremely misleading," Mr Terry said.

The BBC's Jon Kay
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