Water prices set to rise
The company’s proposals could see the average water and sewerage bill in the Thames area increase from £354 to almost £400.
The company says the rate hike is needed to cover a rise in bad customer debt, costs associated with the 2011 transfer of private sewers to company ownership, and a land purchase linked to the Thames Tideway Tunnel.
In 2009 Ofwat set price limits on prices for the period 2010 – 15. Thames said that it has experienced changes to costs that were not anticipated by Ofwat, when price limits were set.
The regulator’s 2009 decision means Thames already has an allowance to increase its charges by 1.4% above inflation in 2014/15. This new application would add a further 8% – around £29 – to the average household bill.
“There are always a small number of potentially significant costs and revenues that can be clearly identified but not quantified," says Stuart Siddall, Chief Financial Officer for Thames Water.
"These are set out at the time of the price review and either the company or Ofwat can seek an adjustment, upwards or downwards, once the actual costs and revenues are known.
"That is what we are doing now.”
Speaking for Ofwat, Chief Executive Regina Finn comments: “We know that household incomes are becoming ever more stretched – nobody wants to see any unnecessary increase in bills. We have made it clear to companies that we expect them to talk to their customers, listen to them, and take account of their customers’ views.
“We will challenge these proposals and question the company strongly on their reasons. Proposed increases will only be allowed if they are fully justified.”
Thames Water says that if the adjustment is approved, the company’s bills would still be amongst the lowest in the country.
A water watchdog group has reacted to Thames’ proposals with disappointment, pointing out that other water companies have absorbed the costs that Thames is seeking to pass on to the customer.
“Our research shows that one in seven customers say they can’t afford their water bill,” says Sir Tony Redmond, London and South East Chair of CCWater. "This is reflected in an increasing number of customers defaulting on payments to their water company. Thames Water’s price hike will add to the problem.”
Ofwat expects to make a final decision by November 2013. Any revisions to price limits would not apply to customers’ bills before April 2014.
Thames Water serves London, Berkshire, Buckinghamshire, Gloucestershire, Kent, Oxfordshire, Surrey and Wiltshire.
