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Last Updated: Thursday, 5 August, 2004, 09:52 GMT 10:52 UK
Water customers face price rise
Man watering garden
Water bills will rise from 2005
Water bills look set to rise by 13% - less than half the size of the increase demanded by water companies.

The decision by water regulator Ofwat means that annual bills could rise by an average of 33 over the next five years - from 249 to 282.

Water firms had called for a bigger increase, which would have resulted in average bills in England and Wales rising by 70.

The industry had called for extra cash to fund infrastructure projects.

Consumer groups argued against such a big increase - which would have seen bills rise to an average of 310 - saying the price rise would hit low income groups hard.

Under the price rises indicated by Ofwat, prices will increase most steeply for Wessex Water customers while Anglian bills will be nudged up by only 3%.

The most expensive average water and sewerage bill in 2009-10 is indicated to be 418 a year, for South West Water customers.

'Fair decision'

Ofwat said the estimated cost of improving water and sewerage networks would be 15.7bn - not the 20.7bn that water companies had estimated.

This is much better news than we had expected and certainly better news than we had feared
Maurice Terry, WaterVoice

The regulator will now consult government agencies, Water UK - which represents water companies, and consumer group WaterVoice before announcing a final decision on billing on 2 December.

"After closer scrutiny of the companies' plans, we consider that they can carry out their essential functions over the next five years for around half the average increase in cost to customers which the companies proposed," Ofwat director general Philip Fletcher said.

"We believe these decisions are fair to customers and companies, and will benefit the environment."

He told the BBC: "The companies have been doing a good job. They've becoming steadily more efficient, they've been investing 50bn in improving the service and protecting the environment over the last 15 years since privatisation.

"We're convinced that they can go on becoming more efficient still."

Debt problems

The Ofwat announcement, covering prices from April next year to 2010, covers England and Wales only - a decision on Scotland is expected at a later date.

"This is much better news than we had expected and certainly better news than we had feared," Maurice Terry, chairman of consumers group WaterVoice said.

Ofwat has recognised the need for some more investment in the infrastructure which is certainly creaking
Pamela Taylor, Water UK
"Even with price rises lower than companies had sought, they are still very big numbers," he said.

The industry faces problems of affordability and debt for customers on lower incomes which would "not be helped by increases of 13% over five years", he added.

But, inevitably the water industry was disappointed by the news.

"No-one's going to pretend that this isn't very challenging indeed," Water UK chief executive Pamela Taylor told Today.

But, she conceded: "I think companies will be pleased that Ofwat has recognised the need for some more investment in the infrastructure which is certainly creaking."

She added that companies will also be looking to find out whether they are "being expected to do everything for less money" or whether Ofwat has taken out one or two proposals for improving their services from the plans.

Extra cash

Water UK submitted its plans for price increases to the regulator in May.

At the time, the firms claimed they needed extra cash to meet government targets on improving the quality of drinking water.

In total, Water UK said the industry planned to spend 22bn between 2005 and 2010 on capital projects - a 5bn increase on the amount spent in the preceding five years.

Among the proposed improvements are major sewer upgrades in London.

Earlier this week thousands of tonnes of raw sewage flooded into the Thames river in the capital as a result of severe sewer flooding.

The price rises will start in 2005, and water companies will be allowed to put on a large part of the rise in the first year, to allow firms to invest in water supply and sewerage.

Water bill rises by company
Company Avg bills 2004-05 Avg bills 2009-10 % increase
Anglian 294 303 3%
Dwr Cymru/Welsh Water 286 337 18%
Northumbrian 232 244 5%
Essex & Suffolk 132 143 9%
Severn Trent 221 257 16%
South West 357 418 17%
Southern 259 303 17%
Thames 211 244 16%
United Utilities 269 315 17%
Wessex 277 332 20%
Yorkshire 243 279 15%
All water companies average 250 284 13.6%
Source: Ofwat (combined water & sewerage)

The BBC's Anita McVeigh
"One of life's necessities is getting more expensive"

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