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Although this Periodic Review of water prices is at an early stage, we are encouraged by signs that it is being conducted in a transparent and mature way.
It seems likely that price limits will be raised in this Review. While it is absolutely imperative that Ofwat should rigorously examine the claims companies make about their costs, we have seen no evidence to make us doubt that it will do so.
There has been considerable debate about the scale and cost of the environmental improvements that the Environment Agency and English Nature have put forward. Water customers must not be expected to pay for every improvement to the aquatic environment, but where water companies are responsible for damage to the environment, they, and their customers, should pay to repair that damage.
The Government must urgently address the issue of how those responsible for diffuse pollution should pay for it. The water companies and Government should do more to manage the demand for water.
We are confident that Ofwat has taken note of concerns about the financial profile of water companies, and will act to address such concerns. It is important that the cost of financing investment is kept as low as possible, but the weighted average cost of capital assumed by the regulator must not be so low that it threatens the credit ratings or even the solvency of water companies.
The difficulties some consumers face in paying their water bills are a matter of great concern to the Committee. Measures to help vulnerable customers do not appear to have been effective. It is not practicable simply to lower bills across the board since to do so would jeopardise the improvements in services and quality that have undoubtedly been made in the recent past and would fail to emphasise that water is a valuable resource.
The Government should review the way poorer households are helped with their water bills and should ensure that the scale of such assistance reflects the current cost of water and sewerage in the areas in which it applies.
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