Conclusions and recommendations
1. We welcome the introduction of draft business
plans produced by the water and sewerage companies themselves
and the greater scope for scrutiny and debate that this allows
at an early stage in the price review process. (Paragraph 11)
2. We welcome the introduction of joint customer
research, as it has limited the degree to which stakeholders have
made competing and conflicting claims about what customers really
want. (Paragraph 13)
3. We recommend that Government, Ofwat, the regulators,
water companies and consumers examine together ways of taking
into account long-term issues for the water industry. (Paragraph
15)
4. We are confident that Ofwat itself has taken
note of concerns about the financial profile of water companies,
and will act to address such concerns. It is obviously 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. There is a place for equity funding,
and the price limits set must reflect this. (Paragraph 20)
5. We encourage Defra to come to an early conclusion
about the best ways of reducing diffuse pollution to water bodies
and how the costs of doing so will be met. (Paragraph 26)
6. Ofwat should pay particular attention to the
methods and assumptions that companies have used when calculating
the costs of environmental and other improvements to ensure that
only fair and reasonable charges are included. (Paragraph 27)
7. We agree that sustainable management of water
resources is in the interests of water consumers and we endorse
the application of the 'polluter pays' principle in the provision
of water and sewerage services: to the extent that water and sewerage
companies cause environmental problems they - and by extension
their customers -should pay for the solutions to those problems.
(Paragraph 31)
8. We add two caveats to this conclusion. First,
where a particular problem has several causes and action by the
water company alone would not be enough to significantly improve
the situation, there is a case for delaying the requirement on
the water company to act until the other causes are also addressed.
Second, while the requirements for environmental improvements
are likely to keep increasing, customers' willingness and ability
to pay ever larger bills are not. Ofwat, the water companies,
the regulators and Government must begin to seek other ways of
addressing some environmental problems. (Paragraph 32)
9. Fixing bills at the level that the poorest
in society can afford to pay would jeopardise the improvements
in services and quality that have undoubtedly been made and would
fail to emphasise that water is a valuable resource. But 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. (Paragraph 41)
10. People suffering from serious difficulty
in paying their bills should be helped through the benefits and
tax credits system. The Government should review the way in which
poorer households are helped with their water and sewerage charges.
It should ensure that mechanisms to help people pay their water
bills take account of the regional variation in those bills. (Paragraph
42)
11. The Government should also issue its response
to the Vulnerable Groups Consultation as soon as is practicable.
It should advise the Committee of its response to the National
Consumer Council's charge that the scheme reached only 1.4% of
eligible consumers and cost more to administer than was paid out.
If the charge is correct, the Government should inform the Committee
how the proposed amendments to the Regulations will resolve the
problem and by what date we can expect a more effective scheme
to be in place. (Paragraph 43)
12. We encourage the Government and water companies
further to examine ways of managing and reducing the usage of
water and the leakage of water from the system. (Paragraph 44)
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