A top official at water watchdog Ofwat has claimed inflation-shattering bill hikes are “fair”.
Ofwat will announce next month how much water suppliers can increase prices by over the next five years. Households are braced for more pain after it suggested in July that average bills could jump by around a fifth – or about £19 a year. That it before taking into account inflation and the heavy lobbying by the water industry which has demanded much bigger increases to help fund investment.
Chris Walters, senior director for the price review at Ofwat, told MPs the investment would come at a “level of bills that is fair for customers and a rate of return that is fair for investors.”
Campaigners have warned of the impact of households who are already struggling to make ends meet. It comes amid fierce criticism of the industry after decades of under investment that has resulted in the scandal of raw sewage pumped into rivers and seas, while investors have netted billions in dividends.
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David Black, Ofwat chief executive, told MPs on the Commons Environment Committee, it was impossible to eradicate such discharges. “We are not going to get to the point of zero sewage spills,” he said. However, he claimed the new wave of investment would begin to deliver improvements. “We think this level of investment will be game changing,” he said. “We think it will lead to a dramatic increase in investment to reduce sewage discharges and upgrade water treatment works.”
His comments come amid fears over the debt mountain built by privatised suppliers. The most acute concern is over the future of debt-laden Thames Water, which is in the process of raising fresh cash to avoid being renationalised. Mr Black admitted: “If we were to run this again, I think Ofwat should have intervened earlier to stop companies reaching such high debt levels. That wouldn’t have necessarily stopped Thames facing the issues, but it may have helped.”
MPs also voiced concerns over bumper bonuses paid to bosses of failing suppliers. Ofwat last week stepped in to prevent customers’ money being used to fund payouts to executives at several firms. The chief executive of Southern Water, Lawrence Gosden, was still able to receive a £183,600 bonus as the money came from elsewhere. Helen Campbell, senior director for sector performance at Ofwat, said the bonus would have been blocked altogether under proposed new powers for the regulator. “We felt the bonuses of Southern Water bosses were not justified by performance,” she told MPs.
The hearing was also told dozens of former officials at Ofwat have gone to work at suppliers, prompting a potential conflict of interest. Some 27 ex-directors, managers and consultants at Ofwat are now in private firms they used to regulate. David Black, head of Ofwat, defended the track record: “Any staff that leave Ofwat we have a set of requirements around what they can and can’t do that applies for up to two years after they leave. “It’s not the case that people have left Ofwat and directly worked for water companies.