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Water companies continue to invest for the future
Water companies are continuing to invest to deliver environmental and water quality improvement, according to a report published by Ofwat today.
The Financial performance and expenditure of the water companies in England and Wales 2006-07 report provides a comparison between the industry's actual performance over the last financial year and Ofwat's expectations of when the price limits were set in 2004.
Ofwat Director of Regulatory Finance and Competition, Keith Mason said:
"We take our role of protecting consumers very seriously and will continue to monitor each company to make sure that it delivers the work that consumers have paid for.
"We welcome the progress that companies have made but where a company fails to provide the service or deliver schemes assumed when we set price limits, we will make sure consumers are not disadvantaged and will take action where necessary."
Our analysis shows that the trends in levels of service performance across the industry continue to be broadly satisfactory. For example, drinking water quality is of a very good standard (99.96% compliant).
But, overall investment in spending on assets (which includes maintenance and improvement schemes) is behind Ofwat's expectations for the first two years of the current price limit period. While the majority of companies are investing what is needed in most areas to maintain the standard of service consumers expect, there have been delays in delivering some improvement schemes.
Despite lower than expected revenues and higher operating costs, operating profits were at a similar level to 2005-06. However, interest costs in 2006-07 fell significantly (by £171 million) because of favourable interest rates. This contributed to a significant increase in pre-tax profits of 26% to £2.4 billion.
Notes to Editors:
1. The Water Services Regulation Authority (Ofwat) is the economic regulator of water and sewerage companies in England and Wales. It exercises its powers in a way that it judges will allow companies to carry out their functions properly, and finance them. Its duties include protecting the interests of consumers, wherever appropriate by promoting effective competition.
2. Since privatisation the industry has invested approximately £70 billion in water and sewerage infrastructure in England and Wales. This equals average annual capital investment of more than £3.9 billion compared with an equivalent investment figure of £2 billion a year during the 1980's.
3. The report, 'Financial performance and expenditure of the water companies in England and Wales 2006-07', is available on the Ofwat website, http://www.ofwat.gov.uk
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