OFWAT has today been hearing the proposals for future price changes from the UK’s major water suppliers. In short they have nearly all announced above inflation price increases (apart from Welsh Water, whose restraint in such a climate is commendable) - mainly citing growing population as an excuse for sometimes up to a 26% rise for 2010-15.

Unsuprisingly share prices jumped in response as shareholders salivated at the prospect of even higher profits for the coming years. Many feel OFWAT has once again stood aside to allow private companies to hold the public to ransom. The question is: at what point will we seriously begin to question the wisdom of privataly owned water suppliers in the UK?

It’s probably best to start off with some more details about yesterday’s announcements, so here is a summary of the proposed price rises for 2010-15:

Company - % increase

Anglian 3.5%
Bristol 26.0%
Cambridge 20.0%
Welsh Water 0.0%
Essex & Suffolk 2.8%
Portsmouth 7.0%
Severn Trent 1.0%
South Staffs 11.0%
South West 12.5% (metered) / 40% (unmetered)
Tendring Hundred 13.0%
Thames 16.0%
United Utilities 11.0%
Wessex 16.0%
Yorkshire 0.6%

The rates vary drastically but most are over 10%, with a couple over 20%. How can such a drastic increase be justified? Well, some companies have stated growing populations as a worry; but does Bristol water for example seriously think that between 2010 and 2015 the population of their catchment area will increase by 26%??

What is the long term picture here? How will prices look by 2020? Presumably the set of increases for 2015-20 will be even greater - Bristol water customers for example could find their water costing over 50% more in just 12 years than it does now (assuming a similar increase next time round).

Accesss to clean water is a fundamental human right, and to be in this situation in a developed Western country is verging on the unbelievable. Perhaps the companies saw their opportunity with the climate of generally rising costs of living and hence decided to get a piece of the action. The fact that some companies have announced either no increase (Welsh Water), or only roughly 1% (Severn Trent & Yorkshire) above inflation is clear indication that the others are misleading and exploiting the public.

Privatisation was touted as a sure fire guarantee that prices would be driven down through market competition and that customers would reap the benefits of such a move. It now seems clear that exactly the opposite is happening.

Surely price increases should be capped by OFWAT - after all clean water should not be treated the same as petrol or energy provision. It is not a consumer commodity but a cornerstone of human health and life, and to have it treated as a profit commodity by the UK government seems absurd. Elsewhere in the world 90% of water supplies are state owned, recognising the fundamental nature of such a service.

It is time OFWAT and the government started regulating the sector properly - and with the public’s needs placed first and foremost; they could start by seriously scrutinising this week’s proposed price announcements and taking steps to protect the vulnerable public from such profiteering.

Dejan Levi