Bigger water bills in the pipeline, watchdog warns householders

Householders should prepare for "hefty"' increases in water bills, the industry regulator said yesterday after suppliers submitted proposals for a 30 per cent increase in charges.

The increases, which the water companies claim are needed to fund a £20bn programme of environmental improvements, would lift the average domestic water bill from £234 next year to £307 by 2009/10.

In some cases bills would rise by substantially more. United Utilities, the supplier for North-west England, is seeking a 71 per cent increase in prices, which would lift the average bill from £243 to £416.

At the last price review in 1999, the head of Ofwat, Ian Byatt, slashed household bills despite a big increase in the industry's capital expenditure.

However, his successor Philip Fletcher conceded yesterday: "I simply don't think that I can repeat his trick a second time around."

Fletcher will tell a conference in London today that "choices" will have to be made about spending programmes and domestic charges.

"If the programme of works which each company will be expected to deliver remains unchanged from those set out in the draft business plan then there can be little doubt that water bills will need to rise substantially," he said.

Fletcher pledged, however, that bill increases would be no higher than absolutely necessary and said that he would scrutinise the companies' investment plans to ensure they were not "gold-plating" their budgets.

Fletcher said he could not repeat the price cuts achieved by his predecessor in 1999 because there was no "bank" of efficiency gains built up that he could claw back.

Nor was there scope for making big savings in future because most of the easy efficiency improvements had already been achieved by the industry.

The consumer watchdog WaterVoice will today call on the Government to fund some of the £20bn of industry investment through general taxation.

But Fletcher ruled that out as a "sensible option", saying: "I don't think for a moment the Government would contemplate a taxpayer subsidy for a system that has worked so well. The moment that customers aren't paying their own bills the accountability of companies weakens."