Safety warning over competition for water

MARY FAGAN

Industrial Correspondent

The Government is to introduce more competition in the water industry, but has said that choice would be initially limited to companies using hundreds of millions of litres every year.

The proposals, announced yesterday, were attacked as "nowt much" by the Labour Party which warned that average customers must not end up paying more to offset lower bills for industry.

Consumer groups also said that there must be safeguards to ensure that households, which have no ability to shop around, are not sacrificed for the sake of a "political gimmick".

A spokeswoman for the Consumers' Association said: "We welcome the extension of competition but it could be very expensive to move water around the country and this could add to prices for the average consumer. There could be cross-subsidies and domestic consumers could actually see their bills going up to pay for competition which will only benefit large users."

The association also called for assurances that safety will not be compromised. The spokeswoman added: "We worry that if you mix the water from different companies it would be more difficult to trace the source of any germ or bug that might get into the system."

The proposal announced in a consultative document by John Gummer, Secretary of State for the Environment, fell far short of expectations raised in comments by the Prime Minister at the weekend.

The plan will allow companies using an annual 250 megalitres - each megalitre is 220,000 gallons - to buy water from a supplier other than their local company. The water would be delivered through the existing suppliers' pipelines under a "common carriage" arrangement. It extends very limited competition provisions which have been in place for about five years but which has yet to be taken up.

Mr Gummer said: "Competition is the best guarantee for consumers that they receive value for money, better services and lower prices."

He hopes to extend competition to other users "in the future". One City analyst dismissed the proposals as "an April Fool from Mr Gummer". He added: "I am not convinced that this talk of competition will actually change much."

Ofwat, the industry watchdog, said the proposals would potentially benefit "exceptionally" large users, probably about 600 to 700 companies a year.

A spokeswoman said: "The idea is have an evolutionary approach. The Government intends to extend it in due course but you are some time away from getting to domestic customers."

But she added that domestic consumers will not bear any extra costs. Ian Byatt, director-general of Ofwat, is looking at removing very large customers from the water firms' price caps, which would prevent firms shifting the balance of charges in favour of larger users.

Frank Dobson, Labour's environment spokesman, said: "These proposals do nothing about the fundamental failings of the privatised water industry, with its soaring prices, profits and bosses' pay and perks. It does nothing to stop the scandal of the leaks or the environmental damage of taking too much water from rivers and lakes during dry spells."