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River sell-off could force water bills up

By Western Morning News  |  Posted: December 10, 2012

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Westcountry consumers could see a hard-fought rebate on water bills wiped out if plans to sell-off reservoirs and rivers go ahead, it is claimed.

South West Water says the plans could deter investors and ultimately drive up customer bills.

The proposals are provoking anger among water suppliers, who are at loggerheads with the regulator Ofwat.

In plans intended to shake up more than two decades of privatised regional monopolies, Ofwat has proposed the introduction of competition in upstream supply — the upkeep of rivers, reservoirs, lakes and boreholes for the abstraction of water.

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The move has been met with warnings across the industry that the result will be higher household water bills, which are set to drop by £50 a year in Devon and Cornwall when a Government rebate takes effect next April.

South West Water has told the regulator it does not "consent to its proposed licensing changes".

"In line with the widespread concern in the industry, we believe the Ofwat proposals as they stand are not in the long term interests of customers because they do not do enough to maintain investor confidence in the sector," a spokesman said.

"However we welcome Ofwat's latest statement which does clarify some of their proposals and whilst we have not been able to consent to the proposals as they are now, we have responded to Ofwat constructively on how our concerns could be addressed.

"We look forward to continuing discussions to achieve an acceptable conclusion which will protect the interests of our customers and investors."

The proposals could lead to a sell-off of assets, plus a sale of treatment works that turn the water into a drinkable supply.

If upstream assets were sold off, it would leave the incumbent companies operating the distribution network of water mains and pipes and the household supply and retail billing of customers.

The far-reaching proposals have horrified the industry, which has long relied on predictable long-term price rises based around inflation.

These are used in business plans presented to investors, which have been tapped for tens of billions of pounds of debt-financed funding.

Household suppliers fear that they would lose control of the wholesale price of water, as they would be reliant on the new owners of rivers and reservoirs.

Measured official responses from the water industry have masked a fury amongst executives, who regard Ofwat as breaking up a tried and tested model that has delivered big investment and also big returns for investors.

The proposals are part of long-term reforms envisaged from 2014.

Hundreds of millions of pounds have been wiped off the value of water companies. Shares in the South West Water group Pennon initially slumped 17 per cent on the announcement of the proposed changes.

Industry body Water UK said investor confidence and cheap financing had so far allowed the sector to keep bills "as low as possible".

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  • billinbarum25  |  December 10 2012, 7:40PM


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  • 2ladybugs  |  December 10 2012, 6:58PM

    If this is just a SWW media briefing, it didn't do their market value much good! I haven't checked the prices today so they may have recovered.

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  • H_Trevorrow  |  December 10 2012, 5:50PM

    well spotted ladybugs. ofWAT are suggesting ways to introduce competition to the industry .......this article is little more than a sww media briefing.

  • 2ladybugs  |  December 10 2012, 5:34PM

    Ofgem!!?? What report and comments are you reading then?

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  • H_Trevorrow  |  December 10 2012, 5:16PM

    Somebody at sww will be wetting themselves with laughter at the comments below as they have actually managed to deflect public distrust on to ofgem who are, the last time i looked, the principle defender of the consumer.

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  • Mustafachat  |  December 10 2012, 4:43PM

    How I agree with JJLee couldn't sum it up better myself. NO WAY should water and the like be sold for profit and rip the nation off, it's a national disgrace. I knew when they got spouting about a rebate they would find a way to grab it.

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  • 2ladybugs  |  December 10 2012, 12:20PM

    @pandddawso Pay more for cleaning the seas!!??? I thought that was why we were already paying more down here in the South West. Are you advocating that we pay even more? Where are all these EU grants when you want one? Perhaps instead of using them to conjure up more full-time, permanent jobs for South West workers, we can use them to clean up the seas, just in case we get an influx of visitors in the summer months!!

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  • pandddawso  |  December 10 2012, 11:59AM

    I think we need to boost the economy of the South West, and I'm not talking about industrialising everything. We must capitalise on our lovely landscape and climate, and draw in the well-off tourists, especially from overseas, who are not troubled by business booms and busts. If in order to do this we must pay more for our water so that SWW can clean up our sea, let us grasp the nettle! The South West is a national resource - anyone that works in the dark Satanic offices of Slough or Birmingham will tell you. There should be a national water levy to help us clean up our bathing waters. When you're in a hole, the way out is UP!

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  • 2ladybugs  |  December 10 2012, 11:46AM

    Well I am afraid I can foresee a time in the not too distant future, when we the consumers, no longer have any money to pay for anything other than water, energy and council tax. Still I suppose the world is overpopulated and by starving a few million from the UK it will ease the problem.

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  • Charlespk  |  December 10 2012, 11:22AM

    Great minds think alike 2ladybugs. . I couldn't believe what I was reading!!! They ALL now seem to think we've got "STUPID" (the polite term) tattooed on our foreheads. It's the same now with the energy companies. Rather the same way as Gordon Brown collected an extra half-year's income tax as soon as they got power. . EDF have increased prices artificially, and now offer 6% "discount" for 'monthly' direct debit meaning they've made a substantial cash-grab at our expense to finance their borrowing. You couldn't make it up!! Peter Rachman would have been proud of them!

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