Ofwat threat to pull plug on Thames Water bills rise

The water regulator Ofwat today criticised Thames Water’s unprecedented demand to hike Londoners’ bills by almost £30 next year.

The UK’s biggest water company wants the industry regulator to let it raise bills, which already stand at an average £354 a year, by 8% next year, claiming it had underestimated the costs of projects such as London’s new super-sewer.

But Ofwat today hit back at Thames Water, which is owned by Australia’s Macquarie and a group of investment funds, saying the supplier to 14 million customers had underinvested on sewer flooding and on sewer treatment, and failed to adequately maintain some of its wastewater network.

The regulator said it is considering whether it can use the failures to claw back money from Thames Water.

Any such move could cancel out the utility’s requested rise, or even lower customers’ bills.

“We have been clear that we would challenge Thames’ proposed bill increase,” Sonia Brown, Ofwat’s chief regulation officer, said, “so we are looking to see if there are areas where we can claim money back for customers.”

Some hike in bills could be inevitable as Ofwat did say it “acknowledges that the costs of [the super-sewer] is unique to Thames Water, and could legitimately be part of an interim application to increase price limits.”

But Brown this week set out plans to force water giants to cut bills from an annual average of £360 to £350 or even £315 by 2020, warning bosses: “Headlines tell a story of rip-off Britain.”

Ofwat’s comments come just months after Thames Water was accused of “ripping off the taxpayer” after revealing it did not pay any corporation tax last year. The supplier also pocketed a £5 million Treasury rebate in the financial year when it made a £549 million profit, and put up customers’ bills by 6.7%.

The company said its zero corporation tax bill was the result of capital allowances on its £1 billion a year investment programme.

Today Thames Water played down the regulator’s comments, saying: “We expected the regulator to set out the format for assessing our application,” and added: “This is part of the regulatory process.”

Ofwat will make its final decision by November, with any change to bills kicking in from April next year.