Consumer Council for Water pleads Competition and Markets Authority to ‘think again’ of their PR19 findings

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The Consumer Council for Water (CCW) has called on the Competition and Markets Authority (CMA) to “think again” after voicing concerns over its provisional plans for four water companies’ future bills and service commitments.

CCW has published its formal response to the CMA’s proposals for Anglian Water, Northumbrian Water, Bristol Water and Yorkshire Water.

This comes after four companies appealed against water regulator Ofwat’s final price determinations for 2020 to 2025 in December 2019.

Emma Clancy, Chief Executive of the Consumer Council for Water (CCW), commented on the announcement: “It appears the voice of the customer has been drowned out by the noise these four water companies have been making.

“Customers don’t have the same right to appeal that companies enjoy if they’re unhappy with the regulator’s decisions so we’ll be urging the CMA to listen and think again.

“The CMA’s plan to increase the rewards for shareholders in return for very little additional investment risks fuelling the perception among many customers that they don’t get a fair deal from their water company.

“We’ve seen in the past how over generosity towards water companies has been very damaging to consumers’ views of the sector.

“It could prove to be a tipping point for some households if they end paying more at a time when many customers are already reeling from the impact of COVID-19.

“Increasing the return for shareholders would also set a dangerous precedent for future price reviews and could embolden more water companies to chance their arm with their business plans knowing that an appeal could open the door to more generous returns.”

The CMA proposes bill increases before inflation of £6 (Bristol), £12 (Northumbrian) and £14 (Anglian, Yorkshire) compared to Ofwat’s Final Determinations, which on average delivered a bill reduction.

The CCW’s formal response states: ‘While customers would approve the increased investment allowed for improvements to areas of service they value – such as leakage reduction and increasing resilience against future risks such as climate change – this comes in a package that proposes bill increases before inflation at a time when many customers will be under pressure financially.

‘We are concerned that the increase in the assumption of the cost of capital that drives these increases goes against recent regulatory precedent and runs the risk of being over generous to companies at the expense of customers.’

The Consumer Council for Water (CCW) is the statutory consumer organisation representing household and non-household water and sewerage consumers in England and Wales.

The CMA published the main party responses to provisional findings earlier this week.

Ofwat has also voiced their concerns, stating in their official response to the provisional findings: “The Competition and Markets Authority (CMA) agrees in principle that the industry needs to improve.

“To a large extent it has provisionally upheld the efficiency and performance challenges we have placed on the four disputing companies.

“Regrettably, however, the Provisional Findings, taken in the round, risk having the opposite result.

“If confirmed, they would impose unnecessary costs on customers with no assurance of any additional short or long term benefit either to customers or to the environment.

“In our view, the CMA’s allowed return would provide companies and their investors with windfall gains and with the ability to pay excessive dividends.

“The overall effect of their proposals would be to significantly weaken the incentive on companies and their investors to focus on delivering services that matter to customers and on improving financial resilience.

“The Provisional Findings also threaten to undermine Ofwat’s ability to regulate effectively in the customer interest, and to cause wider uncertainty across regulated industries.”