Ian Byatt, the Director General, failed to tell them that the 10 regional water and sewerage companies were being allowed an underspend of pounds 424m over three years at the customer's expense. Customers have been charged for mains and sewer repairs that will not be done for up to 15 years.
The deals were revealed by the Independent on Sunday last week. The water companies have already charged customers for pounds 280m worth of 'infrastructure renewals' but had not carried out the work. An Ofwat adviser revealed that the Government made a secret agreement when the water companies were privatised in 1989, that they could 'accrue' pounds 424m by March 1993.
The Sewer Renovation Federation, which represents the sewerage firms, has now written to Mr Byatt demanding he explain why they were previously assured that there would be no significant shortfall in spending by April 1995. It says its members have suffered financially because they were not awarded enough contracts. Three firms have gone into liquidation.
Chris Rees, secretary of the federation, said: 'Had this agreement been in the public domain, there would have been a fundamental objection to this basis of privatisation. Certainly we were not informed of this agreement, and we were, it would appear, misinformed by Ofwat when we raised the question repeatedly and very specifically.' Companies had taken investment decisions, expecting the money for sewer renewals to be spent within five years.
Labour MPs have called for Ofwat's abolition for failing to protect consumers' interests. Richard Burden, MP for Birmingham Northfield, has tabled an Early Day Motion quoting the Independent on Sunday report.