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More price rises are in pipeline for customers
RISING bills, rows over taxes and leaks that leave queuing motorists fuming – the headlines have not been kind to Thames Water of late.
Over the last 10 years, the company’s customers have seen their bills rocket by an average of 76.1 per cent, from £201 a year in 2003 to £354 now.
It is a crucial time for the company – formed after water boards were privatised in 1989 – as it is calling for more inflation-busting bill increases until 2020 to be agreed by watchdog Ofwat.
Recession-hit customers have already been hit by increases of 6.7 per cent last April and 4.8 per cent this year, taking their bills to £370, and £325 for an average metered bill.
It wants Ofwat to approve one per cent above inflation annual increases to 2010. Yet this does not include the cost of a massive London sewer project, which the firm said will add £70 to £80 on bills by 2020.
That’s quite a hard sell for a business that paid no corporation tax last year – it said it delayed it to pay for infrastructure investment – as it announced £549m underlying tax profits.
Like other privatisations under the Thatcher Government in the 1980s, the key intention was to bring private sector discipline to public utilities and spread share ownership.
Yet a vital plank of the policy was to get massive investment needed in the water infrastructure – from pipes to reservoirs to sewers – off the public sectors’ books. To this end, £5bn in the industry’s debts was written off overnight.
Karen Gibbs, policy manager for the Consumer Council for Water, said: “The big challenges for the company are clearly the fact that they have an ageing infrastructure.”
Thames Water told the Oxford Mail that any increase in bills is to “help fund essential upgrades to our ageing pipes, sewers and other facilities”.
Last year it recorded a net investment of £963m. In 2011/12, it spent £3.1m fixing county leaks, including 839 reported by customers with 1,916 so-called “proactive” fixes.
It said it has spent £17bn in investment since 1989.
The impact of leaks can be massive. On the last weekend before Christmas, a burst main in Botley Road, Oxford, caused traffic chaos during one of the busiest shopping periods of the year.
Mrs Gibbs said: “This is the dilemma with leakage. We don’t like to see water going to waste but, at the same time, it is a costly business repairing leaks so the company has to prioritise what it does.”
Ofwat said its zero corporation tax bill for 2012/13 is “morally questionable” but the firm said using capital allowances – which delay payments based on amounts invested – shows the challenge faced.
The allowances are “designed by the Government to encourage companies to invest earlier than they otherwise would and provide a boost to the economy”.
It added: “It will be paid in future years.”
Another major drain on household bills is a £3.6bn plan for a new London Thames Tideway Tunnel “super sewer” aimed at cutting sewage going into the river’s tidal estuary.
Oxford East Labour MP Andrew Smith said last year: “London should pay for it. If London can’t afford to pay for it, then the cost should be spread across UK taxpayers.”
But Thames Water said those outside London had benefited from projects funded by all customers and it is “only fair” the capital now reaped the benefits.
Some £95m of investment is planned in Oxfordshire from 2010 to 2015, including £43.1m on sewage works at Witney, Abingdon and Bicester.
Some have said Ofwat is too tough a regulator and this – along with further environmental regulations – is putting off investment. This even led the National Audit Office to criticise the number of demands on water companies.
Despite this Ofwat says privatisation has turned around “neglected infrastructure” and “polluted beaches and rivers” to a system of “world-class drinking water and a cleaner environment”.
Thames Water said for every £1 in profit since 2006 a further £3 has gone on investment. It said: “Our profits are consistently dwarfed by our investment.”
Mrs Gibbs said the company faces a massive challenge. She said: “They operate in a water scarce area. They are increasingly having to look at alternative ways of meeting other supplies to encourage their customers to use less water.” (See panel).
Installing more free meters is seen as key to cutting usage – Thames Water says consumption falls 12 per cent this way and it wants to increase properties using meters from 30 per cent to 56 per cent by 2020. In 2003, Oxfordshire had 43,000 meters but now has 123,000.
Whether large families who save with the flat rate will be convinced remains to be seen.
Nine tips to save water
- Don’t overfill your kettle
- Only flush the toilet when you need to
- Turn off the tap when brushing your teeth
- Cut down the time you spend in the shower
- Wash your car less
- Fix your leaking taps
- Keep a jug of water in the fridge to save running the tap to get cold water
- Use a bowl when washing up
- Use a water butt to collect rainwater for the garden
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