Byatt faces water challenge
Ofwat proposals: Industry told to cut bills by 14 per cent and invest pounds 15bn over five years
Wednesday 28 July 1999
Hyder, the owner of Welsh Water, also indicated that an appeal was a possibility after being told to cut charges by 14 per cent from next April and reduce its capital expenditure programme by pounds 700m.
However, the overall package of cuts unveiled by Ian Byatt, the director- general of Ofwat, was not as draconian as feared and the share prices of some water companies rallied on the news. Thames, Severn Trent and Yorkshire, all ruled out an appeal to the Commission.
Flanked by John Prescott, the Deputy Prime Minister, Mr Byatt announced that water bills would fall by an average of pounds 34 or 14 per cent next April and stay down for the following four years. At the end of the five-year period to 2005, he said customers would be pounds 38 better off on average.
At the same time, Mr Byatt said the water industry would still have sufficient resources to fund a pounds 15bn investment programme over the next five years, pounds 7bn of which would be spent improving the quality of drinking water and cleaning up beaches and rivers.
Mr Prescott, described the proposals as a "win-win" package for consumers while Mr Byatt warned investors: "There is no doubt profits will be lower. They will come down and largely stay down."
The new price controls set a rate of return for Britain's 26 water companies of 4.75 per cent compared with 7.5 per cent at present and will also force the industry to improve efficiency substantially. The water companies will have to achieve cost savings of nearly 3 per cent a year and improvements in their capital maintenance and environmental investment programmes of 11 and 14 per cent respectively.
The new environmental obligations, coupled with the squeeze on prices, will require the industry to borrow an extra pounds 7bn, taking the gearing of many companies up to 50 per cent.
Shares in Yorkshire Water, which is facing a 15 per cent cut in bills next year, fell most heavily, losing more than 6 per cent, while shares in Thames and Hyder fell by between 3 and 4 per cent. But shares in Anglian Water, which has escaped with the smallest percentage cut in charges, rose nearly 5 per cent.
Northumbrian Water, now part of the giant French utilities group Suez Lyonnais des Eaux, described the price reductions as "unrealistic and unsustainable". It has been told to cut its average pounds 244 bill by pounds 62 next April and then hold keep them virtually unchanged for the next four years. Tony Harding, the company's managing director, said it would be seeking to change Mr Byatt's mind before final controls are set in November. "If the final determination is not different, the company will be forced to consider an appeal."
Hyder, which had warned that Ofwat's initial price curbs could render the company "unbankable", said it still had a number of concerns. Ofwat has factored in a cut in Welsh Water's environmental programme from pounds 1.7bn to pounds 1bn and told it to improve operating efficiency by 22 per cent by 2004/5.
Graham Hawker, Hyder's chief executive, said it would continue to press Ofwat for an outcome that was "deliverable".
The National Consumer Council and Consumers' Association welcomed Ofwat's announcement but said there may be scope for further cuts in bills beyond 2000 while the Environment Agency said warnings from some suppliers that maintenance work could suffer would not wash.
Outlook, this page
Liam Neeson's Downton dreams
- 2 Scottish independence live: Scotland gives a clear 'No' in historic referendum - as it happened
- 3 iOS 8 is full of shiny new features - but it's terrible news for app developers
- 4 Friends 20th anniversary: Six things we wouldn't have without influential comedy series
- 5 Scottish independence: Tory revolt against 'devo max' grows as Rail Minister Claire Perry joins
Scottish independence referendum results: David Cameron pledges plans for 'English votes for English laws' by January
Scottish independence live: Scotland gives a clear 'No' in historic referendum - as it happened
Scottish referendum results: David Cameron set to unveil major devolution of powers to England
Iranian blogger found guilty of insulting Prophet Mohammad on Facebook sentenced to death
Scottish independence: Tory revolt against 'devo max' grows as Rail Minister Claire Perry joins
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Scottish independence referendum: A nation divided against itself
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Scottish independence: The Queen breaks silence on referendum debate – as think tank warns of £14bn black hole if Scotland votes Yes
Portuguese academic says British are 'filthy, violent and drunk'
iJobs Money & Business
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...