CC CONFIRMS SMALL PRICE RISE FOR BRISTOL WATER
04 August 2010 - 8:01AM
UK Regulatory
TIDMBWRA
RNS Number : 4790Q
Competition Commission
04 August 2010
News Release
27/10
4 August 2010
CC CONFIRMS SMALL PRICE RISE FOR BRISTOL WATER
The Competition Commission (CC) has confirmed that Bristol Water plc can make a
small increase in the prices it charges its customers above the five-year price
limits previously set by Ofwat.
Ofwat referred an appeal from Bristol Water to the CC in February 2010,
following Bristol Water's rejection of Ofwat's final determination on price
limits for the period 2010-15, broadly on the grounds that they were too low.
The CC has today (4 August)submitted its final determination to Ofwat, which
will publish it at a later date (when it will also appear on the CC's website).
The CC published its provisional findings in June.
After further assessment, the CC has now decided that Bristol Water should be
permitted to increase its prices so that the average customer bill will rise
from GBP157 in 2009/10 to GBP180 by 2014/15 (an increase of 15 per cent over the
five-year review period). Bristol Water has already sent out customer bills for
2010/11, and the CC has decided that the increase should be introduced gradually
over the following four years. Ofwat had permitted an increase to GBP168 (7 per
cent over five years) in its final determination, while Bristol Water had sought
an increase to GBP202 (29 per cent over the five years).
Appeal Group Chairman, Laura Carstensen said:
We have had to balance our wish to keep customers' bills down with assessing
whether some of the extra expenditure planned by Bristol Water-such as that to
repair mains and reduce leaks-is necessary to maintain its quality of service
and will ultimately benefit customers.
We have looked critically at the projects proposed by Bristol Water, conscious
that any decision to raise bills, even only modestly, should only be taken after
very careful consideration. We have agreed to some of the extra expenditure,
which will mean a small rise for customers above the price limits set by Ofwat,
but equally we have also rejected several other projects, which would have
further increased bills, as well as upholding Ofwat's judgment in a number of
other areas.
The CC looked in detail at the various components used in setting the price
limit, assessing submissions and information supplied by Bristol Water, Ofwat
and third parties including CCWater, as well appointing its own independent
engineering consultants. The work included assessing several specific projects
to maintain and improve service quality and resilience; looking at how Ofwat's
methodology for ensuring efficient and well planned expenditure had applied in
Bristol Water's case; assessing operating expenditure on costs such as pensions,
bad debts and energy and coming to a decision on Bristol Water's cost of
capital. The CC has also confirmed that its cost of capital should be 5 per
cent, which is slightly lower than the figures proposed by Ofwat (5.5 per cent)
and Bristol Water (6.7 per cent).
Notes for editors
1. The CC has been required to determine 'K'. K is the percentage by which
Bristol Water can increase its bills above inflation (RPI) each year. K for each
of the years in the five-year period is shown below:
+----+---------+---------+---------+---------+---------+
| |2010/11 |2011/12 |2012/13 |2013/14 |2014/15 |
+----+---------+---------+---------+---------+---------+
| K | 0.6 | 3.9 | 3.9 | 3.9 | 3.8 |
+----+---------+---------+---------+---------+---------+
2. As noted, since Bristol Water has already issued bills for 2010/11, the K
for 2010/11 matches that set by Ofwat, and the increase that results from the
CC's determination has been smoothed over the following four years.
3. This final determination provides somewhat less money to Bristol Water
than the CC allowed in its provisional findings.
4. The CC is an independent public body, which carries out investigations
into mergers, markets and the regulated industries.
5. The Water Industry Act 1991 requires Ofwat in accordance with the terms of
Bristol Water's licence to refer any disputed determination of price limits to
the CC for determination.
6. Ofwat's final determination is at
www.ofwat.gov.uk/pricereview/pr09phase3/
det_pr09_finalfull.pdf. Bristol
Water's appeal 'in a nutshell' is at
www.bristol-water.co.uk/uploads/news/nutshell.pdf.
7. The members of the Bristol Water Appeal Group are: Laura Carstensen (Group
Chairman), Roger Davis, Richard Farrant, Professor Robin Mason and Edward Smith.
8. Enquiries should be directed to Rory Taylor or Siobhan Allen or by ringing
020 7271 0242.
This information is provided by RNS
The company news service from the London Stock Exchange
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