Ofwat calls for 4% bill reductions

23rd Jul 2009 07:38

Shares in water companies fell heavily after the water regulator Ofwat outlined proposals on pricing over the next five years that were less generous than they hoped.Ofwat's plans would see the average water bill fall by £14 to £330 before inflation between 2010 and 2015, while leaving leave room for £21bn of investment over the five-year period, Ofwat said.Shares in Severn Trent fell by as much as 8%, with other water companies also posting substantial gains. Ofwat's proposals raise the prospect of water companies not being able to maintain their current dividend policies."We understand times are hard and we have listened to what customers have told us," Ofwat chief executive officer Regina Finn said."They want a safe, reliable water supply at a reasonable cost."Ofwat asks companies to submit business plans every five years, outlining how much they intend to invest and how much they need to charge customers to pay for this. It then reviews the plans and delivers its own judgement.The biggest claim was that of Thames Water, which asked Ofwat to allow it to raise prices by 17.2% above inflation in the five year period 2010 to 2015. Ofwat said today it will only allow Thames to raise its bills by £1 between now and 2015.Among companies listed on the stock exchange, Northumbrian planned to raise prices by 2.8% above inflation, Severn Trent by 0.9% and United Utilities by 11%."We understand times are hard and we have listened to what customers have told us. They want safe, reliable water supply at a reasonable cost," said Ofwat chief executive Regina Finn."People can shop around for the best deal on many things, but not water. That's why we've challenged the companies' plans rigorously to ensure that customers get the best value for money," she added.