26/02/08
New price limits set by Ofwat take effect in April. A continuing need for investment and higher operating costs mean that bills are rising on average slightly more (1.5%) than inflation.
The change is based on price limits Ofwat set for each company for each year from 2005 to 2010 at the last periodic price review (in 2004). These set prices in advance in relation to price inflation measured by RPI (4.3% on this occasion).
Continuing investment
The first component of the price change is based on companies’ need to go on investing in improvements to customer service and local environments. This component reflects the cost of investment in three main categories:
• increased activity to ensure a better balance between supply and demand, to maintain mains and sewers, and prevent any deterioration in services
• further improvements in drinking water quality and the quality of effluent returned to the environment following wastewater treatment
• significant reductions in sewer flooding of property.
For the sake of customers, the environment and the economy it is essential to keep investing in the resilience of vital national infrastructure in the face of dangerous climate change.
Higher operating costs
The new prices also reflect companies' increased running costs arising from changes in the costs of energy, taxation, salary and pensions and other inputs.
Some of these cost pressures are reflected in the Retail Price Index; others reflect increased demands made of water companies, for instance to increase water efficiency; all are mitigated by continued efficiency improvements made by water companies.
Water UK background briefing
Water Prices and Investment in
England and Wales February 2008
Ends
For more information please contact:
Barrie Clarke, Director of Communication
020 7344 1804 (out of hours pager 07623 960 573) or
Jeanne Golay, Economic Regulation Adviser
020 7344 1842
