Byatt faces water challenge

Ofwat proposals: Industry told to cut bills by 14 per cent and invest pounds 15bn over five years

NORTHUMBRIAN WATER yesterday threatened to appeal to the Competition Commission after being ordered by the industry regulator Ofwat to reduce domestic bills next year by 25 per cent.

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

Sport
Premier League Live
footballLIVE Follow all the Premier League action as it happens
Life and Style
3D printed bump keys can access almost any lock
gadgets + echSoftware needs photo of lock and not much more
News
The slice of Prince Charles and Princess Diana's wedding cake and the original box from 29 July 1981
newsPiece of Charles and Diana's wedding cake sold at auction in US
News
James Argent from Towie is missing, police say
peopleTV star had been reported missing
PROMOTED VIDEO
Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
News
i100(and it's got nothing to do with the Great British Bake Off)
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind the scenes to watch the latest series
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
i100
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
Sport
Mario Balotelli pictured in his Liverpool shirt for the first time
football
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

DevOps Engineer (Systems Administration, Linux, Shell, Bash)

£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

Financial Technical Consultant (C++, C#, Finance, MSc, PhD)

£50000 per annum: Harrington Starr: Financial Technical Consultant (C++, C#, F...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone