1 INTRODUCTION
1. The Director General of Water Services reviews
the limits on prices that water and sewerage companies may charge
their customers every five years. The current price review began
in October 2002 and Ofwat expects to announce the final determination
of price limits on 2 December 2004.[1]
2. This Committee first looked into the current price
review during its early stages and published its report, Water
Pricing, in December 2003.[2]
The Environmental Audit Committee held an inquiry into the environmental
programme of this price review. It published its report, Water:
the periodic review 2004 and the environmental programme,
in April 2004.[3]
3. We decided to take a second look at this price
round towards the end of the process. Our terms of reference were:
to gauge the reaction of stakeholders to the
draft price limits, and to an extent also to assess how the Periodic
Review has been conducted, particularly looking at how it has
taken - or should take - into account long-term planning for climate
change and environmental improvements.
4. We received written evidence from 17 organisations
and took oral evidence from Ofwat, the Department for Environment,
Food and Rural Affairs, Water UK, WaterVoice and the Environment
Agency in October and November 2004. We are most grateful to all
those who gave evidence and assisted us in other ways.
5. Our inquiry was conducted before the publication
of Ofwat's final determination of price limits. Therefore, we
are not in a position to comment on the final determination. Our
aims in this report are to update the conclusions of our first
report in the light of the way in which the later stages of the
price review were conducted and to comment on some general principles.
In this report we examine:
a) the conduct of the review;
b) the provisions in the draft determination
to tackle sewer flooding;
c) the problem of affordability; and
d) the way long-term issues and investment are
accounted for in the five year price review cycle.
We intend our report to inform debate about the final
determinations and feed into the evaluation of the review process
that Ofwat plans to conduct early in 2005.
1 Q62 Back
2
Environment, Food and Rural Affairs Committee, First Report of
Session 2003-04, HC 121 Back
3
Environmental Audit Committee, Fourth Report of Session 200304,
HC416 Back
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