Regulator Ofwat defends decision to tie price inflation to RPI as opposed to the smaller CPI measure, with bills expected to rise by �16 on average
Water bills are set to rise by an average of 4.6% or �16 to �356 a year in 2011/2012, according to water company regulator Ofwat.
The rise has been set in line with RPI as measured last November, when CPI ? the government's favoured measure of inflation ? was 3.3%. As RPI includes mortgage interest, which is expected to rise in cost this year, the trend for RPI to be higher than CPI is likely to continue.
A spokeswoman for Ofwat defended the use of RPI as its benchmark: "We've used RPI since privation in 1989, and all the other regulators use RPI too. Sometimes it works in the customer's favour, as the RPI rate used last year was 0.3% when CPI was 1.9%."
Ofwat decided in 2009 how much water and sewerage companies could charge customers between 2010/2015 before inflation. The regulator said its challenge of companies' proposed bill rises meant that across England and Wales average bills are set to remain broadly stable up until 2015 and around 10% lower than what companies asked for. The rate of inflation is added to bills on a year-by-year basis.
Ofwat's chief executive officer, Regina Finn, said: "People can shop around for the best deal on many things, but not water. Our job is to do this for them.
"No one wants to see bills increasing, particular in tough economic times. When we set limits on prices we listened to customers and challenged companies hard. That is why average bills are set to remain broadly in line with inflation up until 2015, while companies are investing more than ever before ? �22bn. That is more than �935 for every property in England and Wales.
"This will deliver real benefits to consumers ? from almost 10 million people's water supplies being better protected from events such as flooding to cleaner rivers and beaches."
However, the Consumer Council for Water criticised the rise. Dame Yve Buckland, chair of the council, said: "We recognise that water companies are facing some additional costs in other areas and that there are 'swings and roundabouts' on this issue. However, many water companies and their shareholders will benefit from higher inflation.
"Many customers are struggling with rising household and other bills and debt is rising. Already one in six customers tells us that they cannot afford their water bill.
"Water companies need to make profits and that's fine, but when water companies have done well financially in the past, the Consumer Council for Water has been successful in persuading them to give back �135m to customers in the form of lower prices and additional investments in the water and sewerage network, to benefit customers. We will be talking to the companies to see how this can be repeated in this price period."
The council recommends that anyone who is struggling to pay their water bill should contact their company immediately to see if more flexible payment options, such as weekly or monthly payment plans, special assistance funds, or possibly a special tariff scheme, are available.
Source: http://www.guardian.co.uk/money/2011/feb/25/water-bills-rise-ofwat
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