Ofwat: Thames Water customers will still pay for ‘super sewer’

Ofwat has acknowledged that Thames Water customers will still pay for the Thames Tideway Tunnel, despite its rejection of the company’s application to increase bills for consumers.

Talking to Utility Week, Sonia Brown, Ofwat’s chief regulation officer , said she expected costs associated with the ‘super sewer’ to come forward as part of the company’s business plan for the next price control.

Last week Ofwat made a final decision to reject Thames Water’s application to add an extra 8 per cent to the annual household bill in 2014-15.

Thames had said it needed to increase bills because of costs associated with private sewer transfer, bad debt and the costs of land acquisition for the Tideway tunnel. The land acquisition will cost the company £268.2 million, Ofwat has estimated.

However, Brown acknowledged that customers in Thames’ region would end up paying for the tunnel.

“[Thames Water] will recover efficient tideway costs, it’s just that it will happen in the next price control period rather than next year,” she said.

The water company can still appeal to the Competition Commission and said it would “review the decision carefully” before deciding on its next steps.

Brown defended Ofwat’s decision to launch a consultation on whether it could deduct further gains from the water company through the ‘substantial favourable effect’ mechanism, as it had benefited from “wider economic circumstances beyond its control”.

“Because Thames came forward saying they wanted to look at costs, we are now saying, ok but we want to look at the benefit side associated with this,” she said.

Brown said Ofwat was sending out a message to water companies that it was possible for them to invest in infrastructure without increasing bills.

“Ultimately we think companies should be talking to their customers, hearing the messages around affordability and lowering their bills. If they can’t lower their bills they will have to carefully explain to their customers why they can’t,” she said.