Bristol Water Challenges Ofwat Price Cap Ruling on Spending Plan

Bristol Water Plc is challenging a final decision by the U.K. water regulator Ofwat that capped the bills its customers will pay for the next five years.

The utility, which serves 1.15 million customers in southwest England around the Bristol area, appealed to the competition authority CMA for a review. Capstone Infrastructure Corp. of Toronto is the largest owner of Bristol Water with half of the company. Sociedad General de Aguas de Barcelona SA or Agbar owns 30 percent and Itochu Corp. the remainder.

A new 125 million-pound ($192 million) reservoir proposed at Cheddar is at risk, “effectively scuppered” when Bristol Water was told to reduce prices by 23 percent over the 2015-2020 period, the Western Daily Press reported.

Ofwat’s final determination in Dec. 12 on allowed levels of spending and customer bills to improve and protect water supplies has been accepted by United Utilities Group Plc, Severn Trent Plc and Pennon Group Plc, Britain’s three biggest publicly traded water providers.

In Bristol Water’s case, the Ofwat ruling “makes it very difficult for us to maintain our levels of service and make sufficient investment to deliver the enhancements needed to improve and protect the water supply that our customers told us they wanted for now and in the future,” Chief Executive Officer Luis Garcia said Friday in a statement.

`A Discrepancy'

As there’s ‘‘clearly a discrepancy in calculations because of the size of the gap,’’ a review by CMA over the coming months ‘‘is the only fair way to resolve this,” the CEO said.

Ofwat set the allowed level of total wholesale expenditure for Bristol Water, which has been supplying drinking water for 167 years, at 409 million pounds. It also cut the average household bill from 197 pounds to 162 pounds in the first year, followed by four years at 152 pounds, a 23 percent reduction.

Bristol Water’s business plan for the 5-year period had proposed wholesale expenditure of 541 million pounds and a cut in average household bills of 4.5 percent to 188 pounds.

‘‘The move is unsurprising given that the company has a 32 percent gap between its proposed investment and the level allowed by Ofwat, the highest among its peers,’’ Bloomberg Intelligence analyst Elchin Mammadov said. ‘‘Bristol Water challenged Ofwat’s decision in 2009 and secured a positive revision.’’

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