Ian Byatt, director-general of Ofwat, said that an about-turn on prices, as recently announced by the electricity watchdog, Offer, would be "bonkers". Launching his office's annual report, he said stability was important as it gave companies incentives to improve, which in turn benefited customers.
He declined to comment on Offer's re-opened price review, but added: "I think the idea of pulling it all up by the roots and starting again is bonkers."
His comments will come as a relief to investors, who were outraged in March when Offer decided to overturn prices agreed only last year. The move by Professor Stephen Littlechild, director-general of Offer, caused nervousness about all the regulated utilities.
Mr Byatt said companies that shared the benefits of higher efficiency would be rewarded at his next price review in 1999. A sharing of gains such as that recently announced by North West Water was a "good starting point".Reuse content