Water firms make bigger price cuts

Bicester Advertiser: The two companies will be making real-terms cuts to bills The two companies will be making real-terms cuts to bills

Two water companies serving millions of customers will hold down bills by more than previously expected over a five-year period under plans provisionally approved by regulators.

Dwr Cymru Welsh Water will limit bill changes to 5% below inflation over the 2015/20 period, representing a real-terms cut, while investing more than £2.5 billion, under revised plans submitted earlier this month. It previously planned a 4.8% cut.

Northumbrian Water has pledged a real-terms cut of 2% for the period, with investment of £2.7 billion. It previously planned to leave bills flat in real terms.

Ofwat's draft determination said: "Both companies will reduce bills relative to inflation, deliver better services and meet their statutory obligations."

The outcome is likely to be seen as a victory for the regulator, which has been pushing for companies to accept lower rates of return to ease the pressure of rising bills on hard-pressed households, and will put pressure on rivals.

A spokesman said: "We will intervene where we think customers need to be protected."

Northumbrian Water provides 2.6 million customers in the north east of England with water and sewerage services while it also provides water services to 1.8 million in the south under the Essex & Suffolk Water brand.

It was taken over in a £2.4 billion deal in 2011 by a consortium headed by Hong Kong billionaire Li Ka-shing's Cheung Kong Infrastructure.

Dwr Cymru Welsh Water is a not-for-profit water supply and sewerage company which serves three million customers.

Ofwat chief executive Cathryn Ross said: "We recognise that public trust and confidence is essential if water and sewerage companies are going to remain legitimate in the eyes of their customers.

"These draft determinations will help maintain and build that trust and confidence.

"Under this price review we have seen companies rising to the challenge and developing innovative and efficient solutions for their customers both now and in the future, and for the environment."

The decision means three of the 10 large firms that provide both water supply and sewerage services have now accepted they must hold down charges by more than they had proposed in December.

South West Water had its plans fast-tracked last month after agreeing to a 7% real-terms price cut.

Severn Trent said this week that it would submit a revised plan to Ofwat in June.

Thames Water, the UK's biggest water company, said in December that it wanted to raise bills by more than 10.4% over the cost of inflation, because of its plans to invest £2.8 billion in the Thames Tideway Tunnel, a major new sewer.

It said that that, without this, its bill rises would be below inflation.

Further draft determinations will be published in the summer with the regulator's final decision on all companies to come in December.

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