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Last Updated: Thursday, 2 December, 2004, 09:13 GMT
Q&A: Why are water prices rising?
A Roman drain
Archaic system: Some drains date back to Roman times
Average household water bills in England and Wales will rise by 46 to 295 a year by 2009, the industry regulator Ofwat has said. Why are prices rising and is there anything you can do to cut your bills?

How high will my bill rise?

Average bills will rise by 46, from 249 to 295, over the next five years, with half of the rise for most customers in England and Wales coming in over the next year.

The actual amount will depend on where you live, as prices vary significantly between regions.

Customers of Southern Water, South West Water and Wessex Water will incur the biggest rises, paying an extra 25% over five years on their current average bill.

South West Water will have the highest average bill by 2009-10, at 444 a year on average.

How bad is it?

Prices have risen quite significantly since the water industry was privatised in 1989 - but these are fairly hefty.

Tap water costs on average 0.08 pence per litre
Evidence submitted to House of Commons Select Committee

This is the fourth price review since privatisation. Previous reviews took place in 1990, 1994 and 1999.

During that time the cost of an average unmetered bill has gone up by 30% and metered bills by 19%.

However, the latest rise is short of a 29% increase proposed by the water companies. That would have added 72 to the cost of a typical bill.

Who decides how much we pay?

The prices water and sewerage companies can charge are reviewed every five years by the Director General of Water Services, currently Philip Fletcher.

The water industry is inherently monopolistic, as customers cannot choose between suppliers.

It is therefore up to Mr Fletcher to strike the right balance between the industry's needs and consumers.

Philip Fletcher is responsible for the economic regulation of the water industry.
His duties are set by law, and include the setting of price limits to ensure companies deliver the required services in a "sustainable and efficient way"
He has a number of other responsibilities designed to protect the interests of customers and to facilitate the development of competition in the industry

And this takes some time. The price reviews are not an overnight affair.

The current review began over two years ago, in October 2002.

The review involves significant horse trading between the regulator, the water companies and consumer groups, before a final decision is made.

So, why are prices rising?

The water companies argue that higher prices are needed to fund improvements to the pipeline network along with environmental improvements.

Millions of litres of water are lost each day thanks to leaky pipes.

Figures for 2002-03, the latest available, showed that 3.6 billion litres of water were lost each day.

The Thames region is the worst, losing 925 million litres a day, followed by Severn Trent, which loses 550 million litres a day.

Money must also be used to improve the quality of drinking water, treating wastewater and improving customer service.

Our consumption of water is rising and companies say funding is need to maintain existing sources of supply and find new reservoirs.

Another major priority will be modernising the country's antiquated sewer system.

Customers are also paying for an estimated 4% increase in the industry's operating costs, owing to factors such as rising pension and energy costs.

Will they rise further?

Unfortunately, yes.

Strict new European environmental regulations, such as the Water Frameworks Directive, will have an impact on costs for the industry over the coming decades.

The industry regulator also believes climate change will have an impact, a factor that this price review did not consider.

What impact will the rises have on the poorest?

Between two and four million householders cannot afford their water bills, according to a recent report by the Environmental, Food and Rural Affairs Committee of the House of Commons.

While people on low incomes can receive help with their council tax, and pensioners get assistance with fuel costs, there is no dedicated benefit to alleviate the pain of rising water costs.

"Vulnerable" people can have their bills capped, under the "Water Industry Charges (Vulnerable Groups)" regulations, but few know about it.

Only 7,000 households have their bills capped in this way.

The National Consumer Council says this is about 2% of those who could be eligible.

To qualify, a household must have a water meter, be in receipt of an income-related benefit, and contain either a large family, or a person who has special water needs because of a medical condition, such as a kidney problem.

The government is currently reviewing the system, following widespread criticism.

Is there anything you can do to cut your bills?

Unfortunately, very little.

Unlike other utilities, such as gas and electricity, water users cannot choose their water supplier.

Water costs are based on your property's rateable value, an old-fashioned way of estimating a property's value which dates back to the 1970s.

Unlike council tax, however, there does not seem to be an attempt to revalue properties in line with current property prices at the moment - which would significantly add to people's costs.

The amount you pay does not reflect the amount of water you actually use.

In England and Wales 26% of customers have a water meter
This ranges from 61% of customers of Tendring Hundred Water in Essex to just 5% of Portsmouth Water customers
Among larger companies, only Anglian Water has a majority of its customers (54%) using a water meter

Consumer group Watervoice suggests that if the rateable value is very high, households may be better off with a water meter. Contact your water company for details.

Whether it is worth switching will depend on how much you pay now, the number of occupants in the property and how much water you use.

In general, large families may be worse off with a meter and single occupiers are most likely to benefit.

Buy.co.uk, a utility price comparison website, has a calculator which may help you decide.

Some companies also have online calculators on their websites.

Since April 2000, all meter installations are free. If a company fails to fit your water meter within the three-month deadline, you may qualify for compensation.

People have up to one year to change their mind once their meter has been installed.

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