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Water Week Tuesday, 24 March, 1998, 12:56 GMT
Customers 'lost out' in water sell off
The civil servant who was in charge of water privatisation, Sir Patrick Brown, has told the BBC that the customer "lost out" when the industry was privatised in 1989.

Speaking on the BBC 2 programme The Profits Pump (Tuesday, March 24 at 2100 GMT) which investigates the process of privatisation and how the water industry is regulated, he said:

"As it turned out, I think the consumer should have done better ... It seems to me for the future we ought to be looking to see how the consumer and the company can benefit from the efficiencies they make - a division of the spoils if you like."

According to engineer Terry Powell, water companies regularly use practices which mean that the customer does not get the best deal. Mr Powell works for EC Harris, one of the main firms of quantity surveyors who advise water companies on costs and estimates for price fixing negotiations.

He said that water companies "across the board" often set themselves the most expensive budgets for new schemes, much higher than they need. While this practice may be a better option for the companies, it also results in higher bills for the consumer.

Prices to "come down"

But Ian Byatt, head of Ofwat, the water industry regulator, said that there is good news ahead for the customer. He said he will be able to offer customers a "better price deal" at the next review of water company charges.

"I see a real opportunity for prices coming down, but they are dependent on greater efficiency (of the water companies)."

Mr Byatt said that the last price review led to "a great deal of extra efficiency, great deal of benefit to the customers. Of course there were incentives to shareholders to achieve those benefits, so I believe that there has been a gain all the way around."

But he added that gains for the customer will be long-term rather than short-term.

"That's the nature of the industry and if you try and distribute the benefits too quickly, you've destroyed the incentives; and please don't let us now go back to the days when there were no incentives to be efficient."

The Profits Pump will be broadcast on BBC 2 on March 24 at 2100 GMT and streamed live on the BBC's Water Week Website.

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