Ofwat price cuts could hamper future Anglian Water investment
A POPULIST move to shave a few pence a week off water bills could undermine the industry s ability to deliver clean drinking water to a rapidly-expanding Huntingdonshire population and take away their sewage, Anglian Water fears. The privatised company, w
A POPULIST move to shave a few pence a week off water bills could undermine the industry's ability to deliver clean drinking water to a rapidly-expanding Huntingdonshire population and take away their sewage, Anglian Water fears.
The privatised company, which provides water to most of Eastern England and sewerage for even more households, has been told by the regulator Ofwat to slash its investment plans and substantially reduce its operating costs - even though it is one of the most efficient in the sector.
So angry are senior managers - and not just at Huntingdon-based AW - that the regulator could face a bruising and hugely expensive legal challenge next year if it does not back down.
Anglian Water chief executive Jonson Cox is quietly fuming that Ofwat has ignored savings - some of which at this stage are still aspirational - that were already built in to its five-year bid that would have seen an average bill of around �390 a year rise by about �11 above inflation (about �2 a year).
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That would have helped to fund investment in clean water and sewerage services for most of the 500,000 new homes to be built across Eastern England over the next decade or so, 75,000 of them in Cambridgeshire and 14,000 in Huntingdonshire by 2026.
Instead, the regulator has told AW to cut bills by eight per cent by slashing investment in security of supplies, reducing progress on the already low level of mains leaks, saving money on maintenance and to some extent abandoning the work being done on customers' biggest fear and AW's priority - the distressing issue of sewage flooding.
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Yet, although Cambridge Water, which supplies water but not sewerage to greater Cambridge, including the St Ives and Ramsey areas, has been told to cut bills by a similar amount, it seems more relaxed about the regulator's demands. That may reflect the fact that the big costs lie in what happens to the water after we have used it.
Two things really get up Anglian Water's nose. First, its profits soared during the hot summer three years ago. Instead of giving the windfall cash to shareholders in dividends, it invested it in security of supplies so that, if anything went wrong, large communities such as Norwich or Peterborough had alternative sources of clean drinking water - schemes that are just now coming on stream and will provide resilience for years to come. Comparable schemes for smaller communities may now have been put at risk by the regulator.
The other lies at the heart of AW's relationship with Ofwat. Anglian Water's proposals were costed realistically, even to the extent of including as yet unidentified savings, which meant the proposed costs were lower than current estimates. The company believes the regulator has assumed they were a negotiating position that was expected to be knocked back. That clearly rankles.
"Our plan would have delivered what our customers and the region asked for, and we are already acknowledged as one of the most efficient in spending capital, yet they still want to cut hundreds of millions off the �1billion we proposed to invest," Mr Cox told The Hunts Post. "And I'm not sure how we can cut a further 15 per cent off our operating expenditure when we are already acknowledged as one of the most efficient water companies."
AW can still deliver the service to all the extra homes, he insisted, but he would rather deliver his quality agenda than the regulator's cut-price alternative.