Ofwat To Challenge Thames Water Increase Request

Water regulator Ofwat has said it will challenge Thames Water's request to increase customer bills by as much as 8% from next year.

The increase could see an additional £29 added to an annual average household bill.

The regulator has said it will assess Thames's application in order to determine whether the increases are justified. It will examine the firm's evidence of increased costs and has considered what counter-claims it should investigate on behalf of customers.

Counter-claims are an established part of the regulatory regime, and could reduce the level of any bill increases by deducting gains made by Thames over the current regulatory period.

Ofwat is able to make counter-claims where a company has not delivered outputs for which customers have been paying.

It has now provided notice to Thames that it is making three such counter-claims relating to:

  • underspend on sewer flooding

  • a significant slippage in part of Thames' investment programme for sewage treatment

  • not adequately maintaining parts of its wastewater network.

The regulator will also look at whether Thames has benefited from wider economic circumstances beyond its control, and whether it can deduct these gains through an established regulatory process called the 'substantial favourable effect' mechanism.

As Thames is the only company to have applied for an additional increase in bills before the next price review, Ofwat will only examine whether there is a case for clawing back gains through this mechanism from Thames.

Ofwat's Chief Regulation Officer Sonia Brown said: "We have been clear that we would challenge Thames' proposed bill increase. So we are looking to see if there are areas where we can claim money back for customers."

The regulator will publish its draft decision on the application in mid-October, with any price increase coming into effect from April 2014.

Ofwat sets limits on the prices water companies can charge and these rules apply for five years. Its last price review in 2009 set limits for the 2010-15 period.


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