Consumer group joins attack on water bills

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The Independent Online
WATER companies have failed to meet the efficiency goals set when they were privatised, despite charging pounds 663m in higher bills, according to the National Consumer Council.

In a highly critical report on the industry, the NCC says that operating costs have risen by 6.4 per cent a year on average in the industry, compared with an original efficiency target of a 3 per cent decrease in operating costs.

The NCC attack on the industry follows criticism by the Consumers Association last week.

The NCC report, published today, says that between 1989/90 and 1992/93 the operating profits for the 31 companies rose by an annual average of 20 per cent and profit margins grew from 28.7 per cent to 35.6 per cent.

Over that time dividends paid to shareholders increased by an average of 63 per cent a year but the NCC said consumers' soaring bills and not efficiency were behind the buoyant financial performance of the industry.

The NCC said that since privatisation water bills for domestic consumers had risen by an average of 67 per cent. In the 10 main companies, domestic consumers had paid pounds 2bn more than if prices had been kept in line with inflation.

Both the NCC and the Consumers Association have called on the regulator, Ofwat, to crack down on the industry when it publishes price controls next week.

The price controls will take effect in April 1995 and the companies must agree them or be referred to the Monopolies and Mergers Commission.

The NCC also criticises the water industry for failing to fund its multi-billion pound investment programme by raising money on the capital markets, as was expected when the firms were privatised.