Water firms to offer low tariff

More than half of the water companies are expected to introduce low tariffs for large industrial customers from April following pressure from the industry regulator, Ofwat.

Two or three companies already offer industrial users better rates but at least 18 of the 31 water companies are now expected to offer industrial rates that link charges closely to the cost of supply.

Ofwat declined to give details of the savings, but it is thought that they could be around 10 per cent. The companies offering the lower charges include nine of the 10 main water and sewage companies in England and Wales.

A spokeswoman for Ofwat confirmed that the regulator is pressing for other water companies to provide tariffs for large users.

Large consumers argue that they are cheaper to supply than the average water user for a given volume, because they have the flexibility of storage facilities. The spokeswoman said: "Ofwat has the view that tariffs should be based on costs."

Bills for measured water customers have risen by about 20 per cent over the past five years. Large customers argue that high costs for water and electricity threaten their competitiveness and therefore are against the interests of the nation as a whole.

Very large water users can in theory shop around for water, but in practice there is very little competition so far except where a customer is very close to the boundary between two water supply franchise areas.

Some people argue that there should be a national water grid to facilitate competition. There are, however, substantial problems such as the variability of water quality. The spokeswoman said: "Forget the national grid idea. Common carriage is a long way down the line."

The definition of a large customer is expected to vary. Some are likely to use a threshold of 250 megalitres a year, which is passed by about 1,000 UK businesses.

Ofwat stressed: "With water you do not qualify just because you are a large user but because you can prove there is a lower cost of supply."