Water firms fear pounds 1bn 'loss'

WATER companies warned yesterday that pounds 1bn will be wiped off profits while their investment programmes would be "zapped" if the industry regulator Ofwat goes ahead with plans for a big one-off cut in water bills.

The warning came as the industry released a consumer survey showing that only one in eight households is prepared to pay higher bills in return for major environmental improvements to the network.

The survey, carried out by NOP for the industry lobby group Water UK, also showed that if savings were available then half of the money should be used to reduce bills and the other half to fund environmental improvements.

Brian Duckworth, chairman of Water UK and managing director of Severn Trent, maintained, however, that the main message from the research was that customers would prefer to see environmental and service improvements rather than a reduction in bills.

He said that if the industry regulator Ian Byatt imposed a 15 per cent cut in bills profits would be halved from last year's level of pounds 2bn. The industry's pounds 50m-a-year investment programme would be "zapped" and prices would have to go up, further confusing consumers.

The industry claims that it would cost pounds 11bn to comply with European Union directives to improve water services. Ofwat believes this figure is a gross exaggeration. It has also cast doubt on research carried out by the Environment Agency, showing that consumers would be happy to pay higher bills for cleaner water, saying the surveys need to be treated with "great caution".

According to the Water UK survey of 2,000 customers carried out in February and March, 44 per cent of households would be happy to see bills rise in line with inflation provided there were major service improvements, while 39 per cent wanted to see both bills and service standards held at present levels. Only 13 per cent said they would be prepared to see bills rise by more than inflation to fund major improvements.

Reducing leakages, minimising flooding and improving reliability of supply were customers' top three priorities.

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