Water regulator pays consultants £18m. Guess who'll foot the bill?

Under-resourced Ofwat doesn't have the staff to assess the utilities' new charges to customers

The much-criticised water regulator has been accused of costing bill-payers nearly £20m after hiring consultants at the same time that it was pressuring utilities to reduce their prices.

Ofwat is said to be badly under-resourced and has asked a team led by the accountants PricewaterhouseCoopers (PwC) to assess the business plans of the water companies for 2015-20. The utilities must hand in their final proposals for bill prices, customer service and investment for those five years by tomorrow, with Ofwat's chairman, Jonson Cox, demanding that bills come down in real terms.

However, to cover PwC's contract, which is valued at £6.5m, and the cost of changes to the way that prices are set, Ofwat has trebled the licence fee it charges water companies to 0.3 per cent of turnover. This represents a rise of £18m, to £27m, which industry sources say will inevitably be covered by increases to bills.

One leading executive accused Ofwat of incompetence, lacking in resources and poor planning. "They are a shambles," he said.

"Ofwat is paying shedloads to PwC because they don't have the people to assess the plans. They're putting up their charges to the water companies to pay for their lack of planning – and it gets passed through to customers. Shameful."

Sources also questioned Ofwat's determination to keep bills down, best demonstrated by a ruling it made against the country's biggest water company in early November. The regulator refused Thames Water's proposal for an 8 per cent increase, which would have added about £29 to the typical bill of its 14 million customers in London and the South of England.

However, Thames Water argued that the increase would help to pay for a new super-sewer in London, which is needed to stop waste from entering the River Thames. Bad debts are also on the increase, as those struggling in the wake of the financial crisis are unable to pay up.

There are concerns that the water companies will now be forced to abandon costly maintenance and renewal programmes, leading to leakages and possibly collapsed tunnels on infrastructure that can be well in excess of 100 years old. Ofwat has already been critical of Thames Water over what it views as underspending on flood defences and sewage treatment.

"The question must be: what are we risking in this charge to get bills down? The regulator hasn't publicly said that this [lower investment] could happen as a result," said an industry source.

Mr Cox has been a particular target for the water industry, which has been outraged at news that he has taken an outside appointment with a New York-based fund that invests in European utilities.

The IoS revealed last week that the water companies believe this advisory role with I Squared Capital has a clear potential for acute conflict of interest, though Ofwat insisted that Mr Cox will not discuss the UK water industry with the firm. The GMB union said the appointment was "absolutely disgusting". It has been cleared with the Government.

Earlier this year, Mr Cox was also accused of hypocrisy. He criticised "morally questionable" tax structures used across the industry, even though the water company he used to run, Anglian, paid only £1.6m in corporation tax during his six years in charge.

In barely 12 months in the role, Mr Cox has been on a mission to transform the industry. He recently wrote to the water companies telling them it was time to "build trust and legitimacy by listening to their customers". Meanwhile, the Labour leader, Ed Miliband, as part of a pre-election game plan to focus political debate on the cost of living, has said that the utilities cannot "escape scrutiny".

The change in the political mood has been shown by Yorkshire Water's decision to scrap plans for above-inflation price raises that had already been agreed with Ofwat for 2014-15. The average bill in Yorkshire will be £373, about £6 less than was previously planned.

An Ofwat spokesman said that the licence fee would come down again once the price review is completed. He added: "We've changed the way we will set prices so that customers will get a better deal. These changes mean that more than £2bn in benefits are on the table and we believe there is significant scope for bills to come down.

"These changes have led to an increase in our costs during the period of the review. Using consultancy support for peak periods of work is an efficient way to ensure that we have sufficient capacity to deliver a price review which results in the best deal for customers."

Ofwat will set the final prices on how much the water companies can charge in January 2015.

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Day In a Page

Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most
Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

No grace of God for Katy Perry as sisters act to stop her buying convent

Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
10 best sun creams for body

10 best sun creams for body

Make sure you’re protected from head to toe in the heatwave
Wimbledon 2015: Nick Bollettieri - Milos Raonic has ability to get to the top but he must learn to handle pressure in big games

Nick Bollettieri's Wimbledon files

Milos Raonic has ability to get to the top but he must learn to handle pressure in big games
Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

There is more than a shiny trophy to be won by England’s World Cup women

The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with cynicism and greed
How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map