Examination of witnesses (Questions 200-219)|
TUESDAY 6 FEBRUARY 2001
200. What does that say about the industry?
(Ms Golay) The industry is a long-term industry which
uses assets that can last 100 years.
201. But you say that you approve of a sustainable
water industry, and that is long term. We are planning for the
long term in this Bill, and any regulation would all be about
that. Why are you so scared?
(Ms Golay) We are not scared about the long term:
we have lived with it, and our ancestors have lived with it.
202. Can you not get long-term mindedness, if
that is the correct expression? Can you not get the putative investors
to be mindful of the long term?
(Ms Taylor) That is what they want.
203. Yes, but you are saying they would not
want to invest because of the perceived regulatory risk?
(Ms Taylor) It means it is more expensive to get more
204. How much more expensive?
(Ms Golay) Well, if you compare the rate of return
in telecoms to those of the water industry, they are very different.
I do not have the exact figures but they are at least double.
205. But that is to do with the technology rather
than the type of regulation. On this particular point, we are
told of this increased regulatory risk. All I am asking you is
how much and is it merely that somebody makes a lot of money by
putting out a document in the city which says there has been an
increase in regulatory risk? Is there really that much increase
in risk in terms of the return on the capital?
(Ms Golay) There will be out of the Bill an increase
in regulatory risk for at least two reasons, and there might be
others. One is the short term impact of the abstraction licensing
regime, and the second regulatory risk is that, with the Director
General having a greater variety of objectives to pursueand
not just those which are currently in the statute you are proposing
to change in that Bill but also having regard to new social and
environmental objectives not yet definedthe balance in
the way those various objectives are going to come out is a bigger
unknown than it would be if we had transparent regulation with
specific objectives, so each Regulator's is set out in statute,
and the ring is held by DETR. The open debate would be a good
pointer to how the balance will be struck and what will be acceptable.
206. I think we have noted a nervousness there.
On charging for water, would you welcome new provisions in the
Bill to redress the regressive nature of continued charging on
the basis of old rateable values and metering?
(Ms Taylor) It is interesting that you raise that
in that a number of water companies have looked at other possible
charging methods that they think may be suitable as regards local
circumstances and their own customers. Some have looked at the
possibility of council tax as an unmeasured basis and others have
looked at other ways and actually created their own formula for
discussion with their customers. This, however, has been staunchly
opposed by DETR which we find a shame because certainly we would
be happy to look at this.
207. What are your preferred options?
(Ms Taylor) Our preferred options are for the companies
to do what they think would be right as regards the profile of
208. But not for the Regulator to have that
kind of decision and decide what he thinks is right to do? It
seems you want the cake and to eat it. Could you be specific?
Exactly what kind of charging regime would you propose?
(Ms Taylor) A range.
209. But could you spell this out? What are
the preferred options for the water industry?
(Ms Golay) There is no single set of preferred options.
It is really an issue best left to companies to work out according
to their customer base and their circumstances what are the best
charging methods in their area.
210. Do you not have a view on whether to use
rateable values or council tax data or metering or anything? Can
you not tell us about any mechanism you might propose for charging
(Ms Taylor) No, because that implies that England
and Wales is the same; all areas are the same; deprivation is
evenly spread; large families on low incomes are evenly and neatly
spread and so on, and they are not. So we would say that what
we would like would be the flexibility for companies to devise
a range of charging schemes, whatever they would find most appropriate
for them andcruciallyfor their customers.
211. So if we are going to have competition
between water companies for the supplying of water, then it would
be perfectly reasonable for somebody just to tender for a price
of supplying water to a particular household in different parts
of the country?
(Ms Taylor) If you are touching on competition that
is sadly an area where this draft Bill is completely silent, and
you will know that we have said that we very much regret that
and we would like to see competition in the industryand
we mean real competition.
212. I understand that but, if it is going to
be real competition, how do you do a charging regime?
(Ms Golay) One of the benefits of competition is that
it encourages innovation and existing companies and new entrants
to find new ways of keeping their customers happy. I am sure that
one of those will be finding a way of charging customers which
fits in with the way customers would like to be charged.
213. But you have not come up with any single
idea about charging. You have not stated any single preference
(Ms Taylor) No, but that is not an advantage necessarily.
214. Is this a commonly held view throughout
the water industry and for every water company?
(Ms Taylor) What?
Christine Butler: The ideas that you are putting?
215. Flexibility so companies can do what they
like and be non-committal.
(Ms Taylor) It is not so they can do what they like;
it is so they can do what is most appropriate for their customers.
216. But who determines that? Since there is
no competition between the people in the south west and the people
in the north west, would that not be determined by the companies,
unless they move?
(Ms Taylor) Yes, but what you cannot do is criticise
us when we are asking for competition to be introduced; we are
begging for it; and we have a draft Bill that is silent on it
which we think is poor, to be polite. So if we are saying that
we want to see increased
217. You say you want competition; what we are
saying is charging regimes within that competition framework because
you are not going to be able to say that Thames Water is going
to be able to put their water down my pipes in Manchester. What
you are going to say is there is going to have to be some interchange,
so will Thames Water be entitled to offer any charging regime
that they think is appropriate to me in Manchester, or are they
going to have to have at least a common charging system between
them and North West Water so that the customer can judge value
for money and somebody can judge the question of who pays for
the water to be collected?
(Ms Golay) It would be nice to have a legislative
framework that would
218. But you want a legislative framework, so
what I am saying is, in that legislative framework, how do we
sort out those sort of problems?
(Ms Golay) I am sure, if Thames came to supply Manchester
219. Manchester would be broke!
(Ms Golay)Thames would devise a system that
made its offer attractive to the Manchester customers, and it
might not be the same charging basis that North West Water uses
in Manchester. That is what competition would deliver.