Individuals to pick up water bill for slump

Apr 8 2009 by Karen Dent, The Journal

NORTHUMBRIAN Water says higher costs and less water use by recession-hit firms are behind its plans to raise household water bills by £25.

The Durham company, which also runs Essex & Suffolk Water, has asked regulator Ofwat for permission to raise bills by 3.4% a year over the rate of inflation for five years to pay for improvements. If approved, North East domestic bills would increase from an average £297 a year to £322 in 2014/15.

The figures, in Northumbrian Water’s final business plan submitted to Ofwat, are higher than the 1.3% increase over inflation each year it suggested in the 2010-2015 plan lodged last year.

Northumbrian’s managing director John Cuthbert said: “There have been a number of significant and unavoidable changes since we published our draft plan, including increased tax charges and business rates.

“The economic recession is also having an impact, with reduced water use resulting in the requirement for higher charges to cover our costs.”

If the proposal is approved, its 2.6 million North East customers would pay an average of 41p a day for water and 48p a day for sewerage services. Essex & Suffolk customers, who just receive water, would pay 53p a day.

Mr Cuthbert said: “Our bills in the North East would remain amongst the lowest in England and Wales and those in Essex & Suffolk will continue to be relatively low, considering the investment required to maintain water supplies in this very dry part of the country.” NW issued its final plan to Ofwat yesterday along with Severn Trent Water and United Utilities.

Divisional director of Brewin Dolphin in Newcastle, Vinay Bedi, said: “The other water companies have put in similar price increase requests.

“At the moment, people will say the current request is significantly higher than inflation, but Northumbrian Water has to assess what they think inflation is likely to be between now and 2015.” HSBC utilities analyst Verity Mitchell said: “Most of it is unavoidable, I think. Ofwat will fight them on this – Ofwat will always challenge companies so customers get value for money.

“This is Northumbrian’s best estimate of what they want to spend [but] they seem to be asking for a modest return for their shareholders.”

Stakeholders have until November to give their views to Ofwat, which will then make a final ruling.

NW, Utility Company of the Year 2008, saw half-year pre-tax profits fall 12.4 % to £77.1m to September 30. But revenue rose 4.2%.