It’ll be bad for Ofwat if water gets political

Having successfully set the cat among the pigeons in the energy sector with his price freeze pledge, Ed Miliband has turned his cost-of-living guns on water. Labour will scrutinise the industry to “make sure it is working properly”. There is talk specifically of a “national affordability scheme”, a mandatory social tariff.

Predictably, David Cameron is expected this week to respond with some kind of help for the hard-pressed water customer.
It is easy to see why politicians might lump water in with energy as another greedy, wage-devouring industry that has to be brought to heel. But there’s an obvious, crucial, difference. Water is regulated. If there’s a problem with water pricing, it’s not at the companies that political fingers should be pointing, it’s Ofwat.
This has not entirely escaped the public’s attention. Derek from Bristol commented on the MailOnline’s coverage of Cameron’s potential water bill intervention: “Isn’t this supposed to be what Ofwat does? Has anybody ever heard of Ofwat? Can somebody list the achievements of Ofwat? What is the wage bill of Ofwat? Who is in charge of Ofwat?”
Unfair perhaps. Ofwat has presided over billions of pounds-worth of investment in the water industry, and at £388 the average annual bill is good value for money for most of us. Nonetheless, the reputation of Ofwat as well as those it regulates will be at risk if water gets political.
Poor timing, then, for Ofwat’s IDoK-esque proposal to triple the cap on fees it charges water companies for price reviews (because PR14 is costing a lot). That may slip under the political and media radar, though; water companies are unlikely to kick off given the 29 November deadline for responses “including formal acceptances by companies” is just three days before business plans are due in.
The other thing about political intervention in water is it rides roughshod over Ofwat’s PR14 objective to put the customer in control. Business plans are supposed to have been drawn up explicitly to reflect customer priorities and willingness to pay. It will be a shame if years of hard work and progressive regulatory policy from Ofwat fall casualty to political point-scoring.
If politicians really want to help the water-poor, they should open the public purse, not pile extra costs on other customers.