Letter: Water bills did not overcharge
Sunday 24 April 1994
Bills have risen by the amount necessary to fund a total capital expenditure programme spread over 10 years, which includes improvements in quality and refurbishment and renovation of assets.
The government, in setting price limits to finance the companies' expenditure programmes, thought that it was sensible to concentrate on improving quality in the short term and to build up a liability in the accounts to renew pipes and sewers when the expenditure on quality improvement was expected to fall. If companies had been required to spend more in the early years then bills would have been even higher.
This liability in the accounts does not represent an 'underspend' as Rosie Waterhouse seems to think. In fact, companies have actually spent pounds 136m more than they planned to spend to the end of March 1993.
Many companies have been able to achieve their programmes more cheaply than expected. Where this has been the case I have reduced their charging limits.
Nor is there any secrecy involving these figures. The anticipated five-year totals for each company's capital investment programmes were published in the prospectuses. Their detailed year-by-year plans for the future were not published but Ofwat reports each year on the industry's spending and achievements against forecast for that financial year. Details of individual company spending is given in the company's regulatory accounts, copies of which are available from Ofwat.
I am currently reviewing water company price limits from 1995-2005 and will be taking account of the amount that companies have spent on maintaining pipes and sewers up to 1995.
I C R Byatt
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