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UK water providers fail to pass savings onto customers

14/10/2015

UK water providers have pocketed a £800 million windfall instead of passing the savings onto customers, according to spending watchdog The National Audit Office (NAO).

Research from the NAO has revealed that water companies in the UK have benefited from cheaper finance costs and tax cuts over the past five years, but none of these savings have been passed onto consumers. Customer’s bills have not fallen because industry regulator Ofwat had not properly "balanced the risks" between water companies and consumers, the NAO said.

The NAO has estimated that the water companies have gained £410 million from lower corporation tax rates and a further £840m from lower than expected interest payments over the last five years. The companies then passed savings onto their customers in total of £435m, leaving them with a net gain of £800m.

Ofwat has rejected the accusations, and claims its approach had given customers "certainty about the cost of their water bills". Cathryn Ross, chief executive of Ofwat, told the BBC that it would not have been right to pass on to customers the risk of changes in financing costs, and they gave consumers more certainty about the cost of their water bills. She said:

“Had interest rates gone up between 2009 and 2014, that amount of money would have gone straight on customers' bills. I don't think that was the right thing to do."

Water bills have risen in price by 40% since 1989, with the biggest increases coming between 1990 and 1995.

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