Supplementary memorandum submitted by
WaterVoice
PRESENTATION OF
BILL INFORMATION
At paragraphs 8-10 of our Memorandum of Evidence
(23 September 2004) we highlighted the difficulties in comparing
average household bills with typical measured and unmeasured household
bills.
1. Ofwat uses the average household bill
as the headline figure to present the impact of price limits in
the Executive Summary to its Draft Determinations document and
in all its press notices.
2. In contrast typical bill figures are
used only in the company specific pages (alongside average bills
figures) and in the detailed explanation section of the Draft
Determination document.
3. WaterVoice believes that customers find
it difficult to relate the average figure to their individual
circumstances. We think it would be more meaningful for Ofwat
to present bill figures based on a range of rateable values in
terms of unmeasured bills and based on consumption for different
households for measured bills as follows:
(a) In the company specific pages (51 to
99 in Draft Determination document) as average household bill,
average unmeasured bill and average measured bill. See Annex A
for a proposed layout. There would be a cross-reference to more
detailed bill impact information further on in the Final Determination
document.
(b) In the section on the profile of price
limits and bill (section 9 in Draft Determination document) we
suggest that Ofwat replace the current Table D "Charges"
in typical unmeasured and measured bills with tables that show
bill impact on:
— Unmeasured household—properties
with rateable values of £100, £200, £300, £400.
— Measured household—comprising
one person (where annual water consumption is 60m3), two people
(110m3), three people (160m3), four people (200m3).
See Annexes B and C for a proposed layout.
4. This would allow customers to understand
how the price limits will affect the bills they pay. For example,
a single householder with a meter, or someone living in an unmeasured
household with a rateable value of £400, could relate to
information that matches their circumstances rather than rely
on the average figure quoted. WaterVoice has asked Ofwat to consider
this approach in presenting the Final Determinations.
AFFORDABILITY—IMPACT
OF THE
PRICE LIMITS
At paragraphs 16-20 of our Memorandum of Evidence
we set out the impact of price limits on customers and payment
of bills.
5. The DWP Statistical Summary details the
number of recipients of different benefits. In terms of means
tested benefits to people who are unemployed and to pensioner,
the DWP statistical summery for September 2004 shows:
— Income Support (aged under 60)—2.2
million recipients.
— Pension Credit/Minimum Income Guarantee
(aged over 60) —2.5 million recipients.
6. These customers are at risk of experiencing
difficulty in paying their water and sewerage bills now and this
will increase in April 2005 when bills rise. In addition there
will be families in receipt of Family Credit and others on low
earnings who will be at risk.
7. Research shows that when faced with a
number of bills or outstanding debts customers pay other bills
before water bills as other creditors chase payment more frequently
and rigorously than the water companies, and in the case of all
other utilities have available the sanction of disconnection.
AFFORDABILITY—AMOUNT
ALLOWED FOR
WATER AND
SEWERAGE CHARGES
IN BENEFITS
8. Prior to 1988 water and sewerage charges
were added into Supplementary Benefit as a separate identifiable
item and based on the actual charge payable.
9. Since the introduction of Income Support
in 1988 it has been impossible to identify how much DWP has included
within the personal allowance of this benefit for water and sewerage
charges.
10. DWP state that when Income Support was
introduced an amount for water and sewerage charges was included
in the personal allowance and this amount has been index linked
since then.
11. In 1988-89 the average household water
and sewerage bill was £108 (in nominal terms). In 1990-91
(following privatisation of the water industry the average household
bill was £135 (in nominal terms). In 2004-05 the bill is
£249.
12. If a figure of £108 was incorporated
into the personal allowance in 1988 (to represent the level of
charges at that time) and this has been used as the base figure
for index linking increases in water and sewerage charges the
current personal allowance of any means tested benefits cannot
reflect the current bill level of £249. In the intervening
period a shortfall has developed.
13. Some commentators estimate that the
amount in the personal allowance for water and sewerage represents
60% of the current bill of £249, this is equivalent to £149.40
leaving a shortfall of £99.40 per benefit recipient. For
Income Support and Pension Credit recipients the shortfall is
in the region of £467 million (£99.40 x 4.7 million).
14. This assessment is based on the average
bill in 2004-05 across England and Wales. The figures for individual
water company areas will vary.
AFFORDABILITY—GOVERNMENT
REVIEW—OPTIONS
FOR CHANGE
At paragraphs 21-25 of our Memorandum of Evidence
we set out our views on how the Government review should tackle
affordability.
15. We have submitted a paper to the Cross-Government
Steering Group responsible for the Government review outlining
ways in which the social security system could be modified to
provide help with water bills. A copy of the paper is attached
at Annex D.
16. Each of the options proposed in the
paper would address the regional variations in bills and would
remove the need for the ineffective Vulnerable Groups regulations.
WATER DIRECT
17. Water Direct is a third party deduction
from Income Support. It is a payment facility available to benefit
recipients who are in arrears with payment of water and sewerage
charges. DWP deduct a weekly amount equivalent to the recipient's
annual bill plus £2.85 towards outstanding arrears. Once
the arrears have been cleared Water Direct ceases.
18. WaterVoice (and other stakeholders)
consider the scheme to be limited in its operation. Research shows
that customers are generally unaware of the existence of the scheme
and would welcome greater flexibility—for example to allow
Water Direct on commencement of a benefit claim (irrespective
of whether in arrears) or to continue when arrears have been cleared.
19. While extension of Water Direct will
not address affordability by reducing the amount of an individual's
bill it would help to prevent a build up of debt for an individual.
METERING
20. Details of the proportion of water and
sewerage customers taking metered supplies in 2003-04 and 2004-05
are shown in Tables 18 and 19 of the Ofwat structure and charges
2004-05 Tariff Report.
21. Details of the projected number of customers
who will pay by meter by 2009-10 are given at Annex E.
5 November 2004
| 
