Savings of pounds 4bn may not lead to cuts in water bills

HOUSEHOLDS could be denied cuts in their water bills while water companies and their shareholders benefit from cash windfalls, Lord Crickhowell, chairman of the National Rivers Authority, warned yesterday.

Under rules for regulating the industry's finances, the privatised water companies do not have to pass on any unanticipated savings in their huge capital spending programmes to customers. Last month the industry's economic regulator, Ofwat, gave the final go- ahead for a 10-year, pounds 24bn programme of capital investments to maintain and improve drinking water and sewage treatment.

Lord Crickhowell said there could be scope for large savings and water customers should benefit. Launching his authority's annual review, he pointed out that the costs of implementing new European legislation had originally been put at pounds 10bn. It now turned out that the figure would be pounds 6bn.

The water companies had an obvious interest in talking up the amounts they were obliged to spend.' The numbers were grossly exaggerated,' he said.

Lord Crickhowell said the way the industry's finances were regulated had to be made fairer to customers. 'I feel very uncomfortable about it. If the companies together managed to make a saving of pounds 1bn in capital spending that could be used to cut bills by pounds 3.'

Dilys Plant, of Ofwat, said: 'When we set prices next time, in five or 10 years, we'll look at the companies which have . . . been most efficient and use them as a benchmark . . . That way the customer will benefit.'

Any further cuts in government grants for the National Rivers Authority would harm its ability to catch poachers and track down water polluters, its chief executive, Ed Gallagher, warned yesterday. The organisation had cut 700 jobs and made savings of pounds 65m a year. 'We're at the limit.'