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Water Industry Rip Off

Wednesday, January 13, 2016

GMB Slam Ofwat For Allowing Water Companies To Make Windfall Gains Of £1.2 Billion From Bills Being Too High

Even with windfall gains companies are pleading poverty to erode pension benefits with members forced to take industrial action to defend their incomes in retirement says GMB.

GMB, the union for water workers, commented on the Public Accounts Committee (PAC) report blaming Ofwat for water companies making windfall gains of at least £1.2 billion between 2010 and 2015 from bills being higher than necessary. See notes to editors for copy of the story from Press Association dated 12th January. 

Eamon O'Hearn, GMB Commercial Services Section officer, said “GMB members in the water industry have consistently said that Ofwat is not fit for purpose and that the industry needs greater transparency. GMB has consistently said that the water industry is a natural monopoly and as such should be in public ownership. 

Under the watch of Ofwat, water companies have been allowed to restructure themselves into complex financial vehicles that offshore their excessive profits, in many cases resulting in little to no corporation tax being paid.

Ofwat are still harping on about improving efficiency even though the National Audit Office have identified that there is limited scope left to achieve further savings.

This is something GMB members know only too well through years of cuts to staff numbers, terms and conditions and closure of pension schemes. 

With the windfall gains of at least £1.2 billion we are still seeing the companies (i.e. Northumbrian, STW, UU) plead poverty to erode the pension benefits of their employees. GMB members are being forced to take industrial action to defend their incomes in retirement. 

How can Ofwat be truly independent and wholly concerned customers when often the senior managers in Ofwat are ex-water company executives (e.g. Jonson Cox - current Chair of Ofwat) and vice versa (e.g. Tony Ballance, Director of Strategy at STW - ex Ofwat regulator)? This report proves that they are a watchdog that doesn’t bark.”


Contact: Eamon O’Hearn 07918 777097 or Maxine Bartholomew 07870 176742 or Eddie Parker 07740 804046 or GMB Press Office 07921 289880 or 07974 251823 or 07860 401860. 

Notes to editors

Copy of story on Press Association dated 12th January 2016 

Ofwat blamed over high water bills in damning report 

By Josie Clarke, Press Association Consumer Affairs Correspondent

Households have been paying too much for their water supply because regulator Ofwat has consistently overestimated companies' costs when setting price limits, according to a damning report.

The Public Accounts Committee (PAC) said many householders would be "appalled" to learn that their water bills - which averaged £396 last year - could have been smaller if Ofwat had adopted a different approach to setting limits to the amount companies can charge customers.

The committee of MPs said Ofwat, which was set up to protect the interests of consumers - many of whom have no choice over who supplies their water - had consistently overestimated companies' financing and tax costs when setting price limits.

As a result, companies made windfall gains of at least £1.2 billion between 2010 and 2015 from bills being higher than necessary.

The committee found that Ofwat's efforts to ensure these gains were shared with customers "secured limited results that varied significantly" from company to company.

Financial support for struggling customers also varied substantially.

The committee said it was also concerned that customers in areas of water scarcity were paying to develop expensive new capacity despite the possibility of water trading with other companies being more cost-effective.

It has urged Ofwat to review how it sets allowances for companies' cost of debt and corporation tax, and report publicly on how it intends to improve its performance.

PAC chairwoman Meg Hillier said: "Ofwat was set up to protect the interests of customers, most of whom have no choice over who supplies their water yet must pay bills typically running to hundreds of pounds.

"Many householders will therefore be appalled to learn these bills could have been smaller had Ofwat adopted a different approach to setting price limits for water companies.

"This approach must be reviewed as a priority. We are also calling for greater transparency over windfall gains made by water suppliers, and more effective action to see these gains passed on to customers."

She added: "There should be consistent financial support for people who struggle to pay their water bills, which can amount to a significant chunk of household spending, and accompanying measures to ensure those people know what help is available.

"These and other concerns set out in our report represent significant and pressing challenges for Ofwat.

"It must move swiftly to develop and present clear plans to achieve a better deal for customers, both now and in the years ahead."

The water industry in England and Wales was privatised in 1989 and now includes 18 large independent, privately owned companies who are monopoly suppliers to 22 million households.

ends Ofwat chief executive Cathryn Ross said: "Holding companies to account and protecting customers is at the heart of what we do. That's why we've made sure bills will fall 5% by 2020 and companies will deliver more. We will carefully consider the thoughts of the PAC.

"PAC's comments on gains relate to decisions Ofwat made six years ago. Since 2012 we've stressed that customers are having a really tough time, and stepped in to claw back £435 million from companies. We then challenged companies to reduce bills further, resulting in £3 billion of savings, which will mean bills fall 5% in real terms over the next five years. Service will continue to improve and we will have kept bills below inflation over two decades.

"Yet it's no time for complacency. We've made changes so that companies become more transparent and resilient. And plan more changes to help create a sector customers can trust. That means making companies more efficient, more accountable and much better at responding to what customers want.

"In the last decade we have clawed back £800 million from companies' shareholders, where they have let customers down. If companies don't step up, we'll step in." 


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