U.K. Urges Water Firms to Limit Rises That Top Inflation

The U.K. pressed its biggest water suppliers to hold down price increases as the clamor over inflation-topping energy bills spread to water providers.

Suppliers should also offer price breaks to disadvantaged customers, Environment Secretary Owen Paterson said today in a statement. British water companies were urged as well to review price increases after the regulator Ofwat asked whether suppliers needed to apply the full rises allowed, he said.

Opposition Labour leader Ed Miliband said his party would introduce new social tariffs in the water industry to lessen the pain on the poor as he sought to address the cost of living issue, including his plans to freeze energy prices until 2017.

Britain’s attempt to limit water bills comes after four of the biggest six energy suppliers raised gas and power prices last month at three to four times the inflation rate. Water is the latest political battleground for the government over the cost of living after Labour pledged a 20-month price freeze on energy bills should it win the next general election in 2015.

Prime Minister David Cameron’s Conservatives trail Miliband’s party by about 7 percentage points in opinion polls.

“We know that household budgets are under pressure, and keeping water bills affordable is a crucial way we can help hard-working people,” Paterson said. “That is why we are pressing hard to make sure customers get a fair deal by encouraging water companies to look closely at any price increases.”

Social Tariffs

Severn Trent Plc (SVT), the second-largest publicly traded U.K. water utility, has social tariffs and said its price rise from April will be 1.1 percent below the retail price index for inflation. “It’s right we should do what we can to keep water bills low,” Severn said.

Wessex Water Services Ltd., Bristol Water Plc and South West Water Ltd. have also introduced social tariffs to help vulnerable customers pay bills, according to the Department for Environment, Food and Rural Affairs.

Average water and sewage household bills will rise 3.5 percent or about 13 pounds to 388 pounds ($623) this year, according to Ofwat. Unlike energy suppliers where customers can switch companies, consumers can’t choose their water provider.

Average increases in water and sewer bills since 2009 have been in line with inflation and now cost just over 1 pound a day, Defra said in a statement. This still “substantially” outstripped rises in household incomes, it said.

Paterson also urged a crackdown on bad debt in water companies, challenging the industry’s worst performers to match the performance of the best.

Ofwat is undertaking a review that controls prices companies can charge from 2015 to 2020. The next review, aiming to spur water company efficiencies, may trim bills by 120 million pounds to 750 million pounds a year from 2015, according to Defra.

To contact the reporter on this story: Sally Bakewell in London at sbakewell1@bloomberg.net

To contact the editor responsible for this story: Randall Hackley at rhackley@bloomberg.net

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