Morning:
3°c
OFWAT has stepped back from its declaration of war on high-charging water companies by reining in its plans to slash household bills.
The ruling from the regulator sent shares in the water companies surging.
Severn Trent, which many believed would have to cut its dividend by 20% under an initial Ofwat ruling of lower bills in the summer, saw its shares rise by nearly 5%, 49p better at 1055.
United Utilities which has been selling off parts of its group after its North West water business got an initial tough price review from the regulator, saw its shares climb almost 3%, up 13p at 497¼p.
In its initial ruling on where water bills will go over the next five years, Ofwat signalled an average £14 cut in bills by 2014 and investment across the industry in England and Wales of £21 billion.
Today, Ofwat has withdrawn that cut in bills, saying they will now remain on average flat for the next five years, and instead found an extra £1 billion in investment, much of which will go to prevent foul flooding when sewers overflow.
“We have listened carefully to all our stakeholders but particularly to customers who told us they believe continued investment is as important as the level of bills,” said Ofwat chief executive Regina Finn.
“Some would argue we have gone too far toward the companies, some would way we have gone too far toward the customer. We believe we have struck a balance in which well-managed companies can step up to the challenge.”
Several water companies have threatened to take Ofwat to the Competition Commission if they believe the regulator's price caps are too tough.
The view that the Ofwat ruling has favoured the companies was further reflected in the shares of two other listed water stocks.
Shares in Pennon, which runs South West Water, rose 15p to 502½. It learned it will be able to charge customers £25 more than Ofwat originally signalled.
Northumbrian Water, which also runs the Essex & Suffolk Water company, was told its can raise prices at both its businesses. It was the best performer in the FTSE 250, up 10p at 265½p.
Reader views (4)
We still have the dearest Water bills in Europe. If one does not have a meter then the bills are obscene.
- Stan White, leeds
I have nothing but praise for an Ofwat type organisation in Manchester who deal with United Utilities, due to a billing mistake my water supply bill was put into the name of somebody I supplied through a sub-meter, who then did not pay the bill, when the bill was put back into my name the bill was £3000 which I refused to pay,I then complained and the ENTIRE BILL has been cancelled.
However in UU's defence, their hands were tied as this bill should never been allowed to get past 2 quarters supply, but they are not allowed to terminate a supply if it is connected to a house.Which should be changed.
- Farmer Jim, Its nice here.
OFWAT has is just a pussy cat. When I have had complaints against Thames Water they have done nothing. They miss appointments and it can takes months to sort out problem. I still have not had a penny in compensation. Thames Water don't have any of their own people to dig road and fix / lay new pipes. All the work is contracted out. So if there are n't any contractors free, it can take months. I had one contractor show up, did not like the job and walk off and it took another two weeks to re-arrange a new contractor (and this is after waiting for months).
Also, OFWAT has too many ex-water company staff. They don't give a toss about customers and always side with the companies.
- Anonymous, London
“We have listened carefully to all our stakeholders but particularly to customers who told us they believe continued investment is as important as the level of bills,” said Ofwat chief executive Regina Finn.
Does that included the huge investment these water companies made in non water service concerns, solely to maximise profits and dividend payouts to shareholders, simply because the basis of remuneration for the directors of these companies was not how good their service was to their customers, but how great a return they could achieve on the share price ?
- John, Twickenham
