River sell-off could force water bills up
Westcountry consumers could see a hard-fought rebate on water bills wiped out if plans to sell-off reservoirs and rivers go ahead, it is claimed.
South West Water says the plans could deter investors and ultimately drive up customer bills.
The proposals are provoking anger among water suppliers, who are at loggerheads with the regulator Ofwat.
In plans intended to shake up more than two decades of privatised regional monopolies, Ofwat has proposed the introduction of competition in upstream supply — the upkeep of rivers, reservoirs, lakes and boreholes for the abstraction of water.
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The move has been met with warnings across the industry that the result will be higher household water bills, which are set to drop by £50 a year in Devon and Cornwall when a Government rebate takes effect next April.
South West Water has told the regulator it does not "consent to its proposed licensing changes".
"In line with the widespread concern in the industry, we believe the Ofwat proposals as they stand are not in the long term interests of customers because they do not do enough to maintain investor confidence in the sector," a spokesman said.
"However we welcome Ofwat's latest statement which does clarify some of their proposals and whilst we have not been able to consent to the proposals as they are now, we have responded to Ofwat constructively on how our concerns could be addressed.
"We look forward to continuing discussions to achieve an acceptable conclusion which will protect the interests of our customers and investors."
The proposals could lead to a sell-off of assets, plus a sale of treatment works that turn the water into a drinkable supply.
If upstream assets were sold off, it would leave the incumbent companies operating the distribution network of water mains and pipes and the household supply and retail billing of customers.
The far-reaching proposals have horrified the industry, which has long relied on predictable long-term price rises based around inflation.
These are used in business plans presented to investors, which have been tapped for tens of billions of pounds of debt-financed funding.
Household suppliers fear that they would lose control of the wholesale price of water, as they would be reliant on the new owners of rivers and reservoirs.
Measured official responses from the water industry have masked a fury amongst executives, who regard Ofwat as breaking up a tried and tested model that has delivered big investment and also big returns for investors.
The proposals are part of long-term reforms envisaged from 2014.
Hundreds of millions of pounds have been wiped off the value of water companies. Shares in the South West Water group Pennon initially slumped 17 per cent on the announcement of the proposed changes.
Industry body Water UK said investor confidence and cheap financing had so far allowed the sector to keep bills "as low as possible".