Markets greet water cap ruling
Nov 26 2009 by Sue Scott, Evening Gazette
NORTHUMBRIAN Water’s share price strengthened by nearly 10 points in the first half hour of trading this morning as the market reacted to a more generous than expected ruling on prices by regulator Ofwat.
In its long anticipated announcement on what companies will be allowed to charge customers over the next five years, Northumbrian Water came out significantly better than most.
Across the group, which includes divisions in the North-east, Essex and Suffolk, Northumbrian’s bill increases were capped to 6% - the equivalent of £17 per customer, while bills on Teesside will rise by 5% or £14 over the period.
Essex and Suffolk, where the company has already embarked on costly expansion to a major reservoir, will see the most significant rise of 13% to £21.
Across the UK, households will see a £3 fall in average water bills to £340 before inflation.
The watchdog’s final decision is less generous to consumers than the £14 before inflation cut first proposed in July and follows a hard fought campaign by water companies who argued that investors would be frightened off by severe caps and improvements to services such as flood prevention and preventing leaks would be threatened.
But today Ofwat said that although its decision would see prices around £34 or 10% lower than under the plans submitted to the regulator by water companies earlier this year, around £22bn of works would still take place.
In a statement, Northumbrian Water said: “Ofwat's proposals allow average annual household bills to rise (before inflation) by £14 to £313 over the five-year period.
“The proposals include an investment programme of over £1.2 billion across the areas served by Northumbrian Water in the North East and Essex & Suffolk Water in the South East. In the North-eEast, they include a significant investment to address sewer flooding and a large mains cleaning programme to deal with discoloured water.
MD John Cuthbert said the group would now consider Ofwat’s ruling before making any changes to investment plans. An announcement is expected within the next few weeks.
