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Tuesday, July 27, 1999 Published at 10:31 GMT 11:31 UK

Business: The Economy

Water bills to fall

Bills may fall by over £50 a year - depending on where you live

For the first time since the water companies were privatised, the prices they charge in England and Wales are set to come down.

The water industry regulator Ofwat has told utilities to cut their bills on average by 14%.

Some consumers could see their bills shrink by as much as a quarter, while others will get off less than 10% on their water charges.

The BBC's Greg Wood: "Better than expected deal for customers"
Ofwat's Director General, Ian Byatt, said the proposals would cut the average £245 ($390) a year household water bill by about £40 and still allow utilities a £15bn capital investment programme during the next five years.

Ofwat has also told water companies to spend more on improving the quality of drinking water and cleaning up rivers and beaches.

Mr Byatt said the environment programme was scheduled to cost £7bn.

Richard Bilton reports on the benefits for business
Deputy Prime Minister John Prescott called the price cuts a success of government policy.

He said: "We have always said that big cuts in water bills can and should go hand-in-hand with a big environmental programme."

"This is win, win for customers. Next year they will benefit from lower prices and a better environment", he added.

Regional variations

The biggest cuts will be made at Northumbrian Water, where bills will come down by 25.5%. The company is owned by Suez Lyonnaise Des Eaux.

Chris Mellor of Anglia Water: "It's going to be very tough for the industry"
Customers of North West Water, part of United Utilities, will see bills cut by just 9.3%.

The customers of the other water companies in England and Wales can expect cuts of:

  • Thames Water - 11.7%
  • Severn Trent - 14.1%
  • Hyder's Dwr Cymru - 13.8%
  • Yorkshire Water - 15.2%
  • Anglian Water - 11.1%
  • Scottish Power's Southern Water - 15.6%
  • South West Water - 13.7%
  • Wessex Water - 13.5%

Before Ofwat published its report, the water companies had argued that they would be unable to carry out essential maintenance if they were made to cut bills.

Ian Byatt: "I've got good news for customers"
Anglian Water described Ofwat's price suggestions "aggressive" and said Mr Byatt was taking "a short term view of investment".

Chris Mellor, Managing Director of Anglian Water, said the customers knew that "you don't get anything for free. It's about balance".

Severn Trent said the price cut in the first year of 14.1% was "larger than we envisaged".

Only the company hit hardest by Ofwat, Northumbrian Water, said it was considering taking an appeal to the Competition Commission.

However, industry analyst Gordon Culfeather of stockbroker Sutherlands said: "I suspect they (water companies) will not be too unhappy with this arrangement."

Jobs threat?

Lower prices will mean lower profits, and trade unions are worried that this will increase the pressure to generate further efficiency savings.

Unison, the largest trade union in the water industry, said it was disappointed at the pricing proposals as once again members' jobs would be at risk.

Consumer windfall

The Consumers' Association (CA) welcomed the price cuts as a "windfall for water consumers".

Sharon Darcy, senior researcher at the CA, said the "water windfall" was "long overdue".

The water industry is the second most profitable on the UK stock market.

She said that water companies had been "reaping in profits since privatisation. They have saved money from being more efficient but have failed to pass these savings onto consumers."

Neil Fishpool, the co-ordinator of the National Campaign for Water Justice, warned however, that the proposed cuts could evaporate before they reach the consumer, because of the huge cost of bringing England and Wales up to European Union beach standards, and the replacement of old lead water pipes.

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