Ofwat has provisionally decided not to allow Sutton and East Surrey Water to raise its prices by an average of 10.2% before inflation in 2009-2010.
The application would have resulted in more than 250,000 consumers having a significant increase in their water bills. Ofwat’s draft decision means the prices the company can charge will remain unchanged.
Regina Finn, Ofwat Chief Executive, said:
“It’s Ofwat’s job to make sure that customers get a fair deal from monopoly water companies. The onus was on the company to convince us that higher bills were necessary.
“That’s why, after carefully scrutinising the application, we have provisionally rejected the request to increase prices.
“We are confident that Sutton and East Surrey Water have the necessary finance in place to provide the quality of service customers expect.”
Sutton and East Surrey applied to increase prices due to increased energy costs and a claimed substantial and unforeseen shortfall in revenue. They stated the shortfall came as a consequence of water restrictions due to a drought in 2006 and heavy rainfall in 2007.
Ofwat is not convinced that these circumstances threaten the ability of Sutton and East Surrey to finance its functions up until 2010 when Ofwat will set prices for a further five years. Ofwat also concluded that a significant proportion of Sutton and East Surrey’s additional power costs could have been avoided through prudent management.
There will be a consultation period until 26 November 2008 for customers and the company. Ofwat will announce the final decision in December 2008.