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Last Updated: Wednesday, 9 May 2007, 23:26 GMT 00:26 UK
MPs attack 'weak' water watchdog
Water pipe burst in Bristol - image courtesy Craig Dolwin
Leaks from broken pipes have contributed to water shortages.
Water watchdog Ofwat is too weak and should impose maximum fines on companies which fail to stop leaks, a committee of MPs says in a report.

The Public Accounts Committee also urges the regulator to consider awarding customers compensation in cases of poor performance.

It said Ofwat should take legal advice on revoking companies' licences.

Ofwat insisted that where companies had not delivered, it had taken action on consumers' behalf.

A spokesman said: "Ofwat protects consumers by keeping prices down, driving improved service and where companies fail to deliver taking effective action."

The report comes after two dry years in which eight companies imposed hosepipe bans because of water shortages.

And the MPs warn that further shortages can be expected in coming years, despite the wet winter of 2006-07.

Penalty

The report says that Ofwat has been "weak... in using sanctions against companies that under-perform".

Despite missing its leakage targets every year since 2000, Thames Water incurred no sanction until 2005/06.

Even then, Ofwat did not use the new powers it was granted in 2005 to impose financial penalties, accepting instead a legally binding undertaking to carry out the 150 million replacement of 230 miles of water mains.

In April this year, the watchdog proposed the first fine on a water company for "repeated and serious breaches" of licence conditions - the proposed penalty amounted to 0.7% of United Utilities' annual turnover.

The committee warned that, by failing to use its powers to punish companies, Ofwat "risks sending a message to the industry that it will not readily use sanctions where appropriate".

'Limp attitude'

The report warned that without efficiency improvements, demand for water will outstrip supply in many parts of England and Wales - particularly the heavily populated south-east.

The committee said Ofwat should devote more of its energy to promoting efficiency, by encouraging households to switch to metered supplies and commissioning research on the best ways to save water.

But it said the watchdog had failed to establish basic facts about how much water consumers currently use and which efficiency measures are effective.

Committee chairman Edward Leigh said Ofwat had been "passive" in its regulation of the water industry, adding: "Nowhere is its limp attitude towards the industry demonstrated more clearly than in the case of the serious wastage of water by Thames Water.

"Thames missed its annual leakage targets for six years in a row without so much as a slap on the wrist. In future, such a wanton waste of water by a company must be rewarded with the maximum possible fine."

Ofwat said that without its work, the average water bill would be 90 a year higher.

A spokesman also pointed out that Thames Water's 150 million investment in water mains was more than twice the maximum fine it could have imposed.

Thames Water declined to comment.




SEE ALSO
United Utilities faces 8.5m fine
18 Apr 07 |  Business
Water and sewage bills up by 7%
28 Feb 07 |  Business

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