Under-investment in sewer and sewage treatment schemes by Thames Water is one of the reasons behind the water regulator’s refusal to sanction an 8% rise in the company’s water bills next year.
Thames is the only one of the 18 regulated water companies to apply for a rise but Ofwat has denied the request in a draft decision announced today. Thames Water’s rise would have added £29 to the average annual household bill. A period of consultation now follows and a final decision will be passed down in November.
Thames had pleaded that it faced extra costs of £219 million a year because of rises in its own costs since the current pricing regime was started in 2009, which already allows it to increase prices by 1.4% above inflation in 2014-15. The higher costs included the transfer of private sewers to Thames ownership, land purchases for its various operations and higher Environment Agency charges.
Ofwat accepts that Thames does face some higher costs but they were not high enough to trigger a rise in bills.
Thames had accepted earlier that it benefitted from changes to the delivery of its sewer flooding work programme and proceeds from selling surplus land. Ofwat says these factors along with ‘a significant slippage’ in a major sewage treatment scheme and ‘not adequately maintaining parts of its wastewater network in previous years’ benefitted Thames, offsetting the justification for a price rise.
Ofwat disputes Thames’ estimate of land acquisition for the Thames Tideway project, holding that it should be lower than the £268 million that Thames claims, and says the company did not include all the proceeds from land sales in its application that it should have.
Ofwat says Thames should return to customers in the current planning period some £42 million of unused capital expenditure that was allocated to the Deephams sewage treatment works where the programme has slipped into the next period, AMP 6.
