Water firms 'tapped homes for pounds 300m': Consumers' group condemns growth of profits. David Nicholson-Lord reports

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The Independent Online
DOMESTIC WATER customers have paid an 'extra' pounds 300m to the water industry since privatisation, much of which appears to have gone straight into company profits, according to an analysis by the Consumers' Association published today.

Profits of the water companies have risen much faster than average since 1989-90, Which? magazine says. The growth has been at the expense of domestic customers, who have had to shoulder a disproportionate share of the costs of improving services. Business and industrial customers, which are often the worst polluters, have escaped relatively lightly.

Which? says the performance of the water industry has been 'lamentably poor'. Costs of water vary enormously from region to region and many consumers have faced 'dramatically' higher prices for a poorer service.

Since 1989-90, average bills for water and sewerage have risen by 77 per cent and 70 per cent respectively, more than three times the rate of inflation, and much more than customers were originally told. In 1989, the Government said average price increases of 5 per cent a year above inflation would be needed throughout the Nineties to maintain and improve services.

In some areas price rises have been much steeper. Water from the Tendring Hundred company in East Anglia costs 150 per cent more than at privatisation. At the same time water company profits have risen by more than 70 per cent, 'considerably higher' than for the privatised electricity companies or British Gas, and well ahead of average share increases since 1989 on the FT-A All-Share index, which were 39 per cent. Water company shares rose by almost 100 per cent; dividends to shareholders have risen by 110 per cent.

Which? acknowledges that investment was needed to improve quality and cut pollution, but says the proportion of companies' income provided by domestic users has increased from 84 per cent to more than 90 per cent, equivalent to an extra pounds 300m.

There are also wide variations in price. The cost of taking a bath in Exeter is almost twice that in London. The highest domestic bill, pounds 304 for South West Water, compares with pounds 162 for Thames Water, the cheapest. Other companies with high average prices are Anglian (pounds 264), Dwr Cymru (pounds 256) and Wessex (pounds 223). Next lowest, after Thames, are Severn Trent, North West and Northumbrian, all charging around pounds 180.

Barbara Harvey, principal researcher with the magazine, said rises 'might be easier to accept if consumers could be sure that everyone - including business and industrial customers - was paying fairly towards the cost of improvements. That just isn't so.'

The association said that, in the absence of competition, the new price controls to be announced by Ofwat, the water industry regulator, later this month must be stringent. 'Domestic consumers should not be forced to bear an unfair share of the load.'

The Water Services Association said profit comparisons with other privatised utilities were spurious, and rejected charges that the service was worse. Which? had failed to recognise the investment needed in water after 'years of neglect from public funding'.

(Graph omitted)