CMA Sides with Water Firms Against Water Regulator Ofwat

The Competition and Markets Authority (CMA) has sided against Ofwat in their plan to cut an average of £50 from water bills annually by reducing industry revenues.

A revolt against Ofwat began earlier this year when the water regulator told suppliers that they must continue investing in excess of £50bn into the country’s water infrastructure whilst simultaneously cutting water bills.

The UK’s competition watchdog agreed that investment in water pipes and reservoirs would be hindered by lower revenues, as was argued by four suppliers - Anglian Water, Northumbrian Water, Bristol Water, and Yorkshire Water.

Ofwat insists that suppliers should increase efficiency in order to lower bills, however the CMA believes that companies should be allowed to make much more profit than Ofwat has allowed.

The chair of the CMA’s inquiry group, Kip Meek, said that water suppliers ‘need to be provided with more revenue to secure continued investment in the sector’, despite the fact that the CMA agrees with Ofwat on many issues.

Meek said the CMA ‘looked closely at all the evidence provided by Ofwat, the disputing water companies and third parties’ and that its findings ‘strike the right balance between bill reductions and the interests of current and future customers’.

The chief executive of Citizens Advice, Gillian Guy, called on the CMA to ‘look again at all the evidence’ and expressed disappointment that the watchdog did not seek a better deal for consumers ‘particularly at a time when so many people are struggling financially’.

A Citizens Advice study found that the water regulator could have been much tougher on water suppliers, who have paid out big dividends to its investors whilst allegedly profiteering at their customers’ expense.

“Supplying an essential service shouldn’t be a one-way street,” said Guy. “The profits of these monopoly companies must be balanced by a fair deal for the general public. When the expected cost of maintaining industry infrastructure is set unrealistically high, bills are inflated unnecessarily.”

Ofwat chief executive, Rachel Fletcher, said that the regulations Ofwat had planned ‘demanded a step change from the sector’ and that it was ‘unsurprising that four companies considered the challenge uncomfortable’.

“We wanted this price review to be demanding, making companies more efficient, improving their performance for customers, and closing off easy returns for investors,” said Fletcher.

“Over the coming weeks we will make the case to the CMA to ensure customers get a good outcome, and that it is not too easy for investors to make returns in this sector.”