Ofwat's decision and our response
Ofwat published its final determination (Click here to see Ofwat’s determination fact sheet) on November 26th 2009. Industry-wide the outcome was perceived by most companies as being particularly tough. We studied our determination carefully looking at every aspect in detail and the implications inherent in Ofwat’s thinking. Up until now, we have been able to accept their decisions. However, we do not believe what they decided for the period 2010-2015 is in the best interests of our current and future customers.
For well over 160 years, we have provided an essential service. We have industry-leading standards of service, excellent water quality, one of the lowest leakage levels – and below-average bills.
There is a huge gap between what we know we need and what Ofwat are willing to fund. We believe we need to invest £1m a week until 2015.
That’s why we have taken the highly significant step, for the first time, of rejecting Ofwat’s decision and asking for the matter to be reviewed by the Competition Commission.
We do not think that Ofwat has allowed us to raise enough money so we can fund what needs to be done –and what customers asked for.
Ofwat, simply, has got it wrong in Bristol Water’s case and we have no alternative but to reject their decision.
We are not scare-mongering but if we do not get a better ‘settlement’ then we have real fears that the pipes, pumping stations and treatment works will deteriorate because we will not be able to carry out enough maintenance and replacement.
At the same time, we will not be able to provide proper security of supply for over 450,000 people – we produced schemes to do this but they were not funded.
In the longer term we are concerned that, unless we invest what we need, we will not be able to supply enough water to meet rising demand from population growth.
Our proposals would mean the average household bill rising by 87 pence a week by 2015. In percentage terms, that will sound a lot, but it is still real value for money.
Any increase in bills is unwelcome, especially in the current economic climate, but we have worked to find ways to minimise the increase; and we have also put in place extra help for struggling customers.
The truth is that our customers have benefited from a long period when we have been able to keep bills down by ‘sweating’ our assets’ working lives. We cannot delay investment any longer, though. It just isn’t in the interests of those we supply.
In a nutshell – click here – Bristol Water’s Price Appeal - IN A NUTSHELL
PRESS RELEASE
“IN THE INTERESTS OF ALL OUR CUSTOMERS, BRISTOL WATER CANNOT ACCEPT NEW PRICE LIMITS.”
Bristol Water has today announced that it cannot accept the regulator Ofwat’s determination of price limits between 2010-2015. The Company says that it has no alternative but to ask for the issue to be referred to the Competition Commission for review.
Bristol Water, which supplies over a million people and businesses in the West, says that during the long price-setting process it worked hard and innovatively to find solutions to a range of issues at the least possible cost to customers.
The Company’s proposals would mean the average household bill rising by 87 pence a week by 2015.
Without that money, Bristol Water says it will:
- NOT be able to carry out enough maintenance and replacement of the company’s pipes, pumping stations and treatment works and they will deteriorate.
- NOT be able to supply enough water to meet rising demand from population growth.
- NOT be able to provide proper security of supply for over 450,000 people
“Ofwat’s decision does not allow us to do all this, “ said managing director Alan Parsons. “In our judgement, Ofwat has proposed a determination that is not in the best interests of current and future customers. What we must deliver will cost much more than Ofwat has allowed.”
He continued: “We are aware that our proposals mean increasing customer bills. We have worked very hard to find ways to minimise the increase. What we propose would still represent great value for money – but we have also put in place extra help for customers who struggle to pay their water bills.
“Our customers have benefited from a long period when we have been able to minimise bills by stretching our assets’ working lives. Unfortunately, there are now a number of factors coming together that mean increased levels of investment cannot be deferred any longer. This inevitably means costs, and bills, increasing. We do not agree with Ofwat about the scope of necessary work and cost of dealing with these issues and so must ask the Competition Commission to review the matter.”
What happens now?
Like all the other water companies in the industry, Bristol Water had until January 26th either to accept Ofwat’s decision or to ask for a referral to the Competition Commission. The price limits already set by Ofwat for 2010/11 become effective in April this year. The limits determined by the Competition Commission will take effect from April 2011.
BACKGROUND
Bristol Water’s Final Business Plan set out proposed service and investment levels and price limits. The company said it needed to invest £319 million in the five years to March 2015 by
- investing so that the essential infrastructure does not deteriorate
- having enough water available to meet growing demand, despite climate change
- cutting leakage by 10%
- making further water quality improvements
- providing greater security of supply in due course for hundreds of thousands of people
Our proposals mean investing over £1 million a week to 2015. After taking account of operating costs and related financing needs, less potential efficiencies, this would see the average yearly bill rise to £202 by 2015.
OFWAT'S fact sheet
Click here to read Ofwat’s price determination fact sheet for Bristol Water.
