BWRA Bristol Wtr.8t%

 

TIDMBWRA 
 
RNS Number : 4790Q 
Competition Commission 
04 August 2010 
 
 
 
 
 
 
 
 
 
 
News Release 
 
 
 
27/10 
                                          4 August 2010 
                CC CONFIRMS SMALL PRICE RISE FOR BRISTOL WATER 
The Competition Commission (CC) has confirmed that Bristol Water plc can make a 
small increase in the prices it charges its customers above the five-year price 
limits previously set by Ofwat. 
Ofwat referred an appeal from Bristol Water to the CC in February 2010, 
following Bristol Water's rejection of Ofwat's final determination on price 
limits for the period 2010-15, broadly on the grounds that they were too low. 
The CC has today (4 August)submitted its final determination to Ofwat, which 
will publish it at a later date (when it will also appear on the CC's website). 
The CC published its provisional findings in June. 
After further assessment, the CC has now decided that Bristol Water should be 
permitted to increase its prices so that the average customer bill will rise 
from GBP157 in 2009/10 to GBP180 by 2014/15 (an increase of 15 per cent over the 
five-year review period). Bristol Water has already sent out customer bills for 
2010/11, and the CC has decided that the increase should be introduced gradually 
over the following four years. Ofwat had permitted an increase to GBP168 (7 per 
cent over five years) in its final determination, while Bristol Water had sought 
an increase to GBP202 (29 per cent over the five years). 
Appeal Group Chairman, Laura Carstensen said: 
We have had to balance our wish to keep customers' bills down with assessing 
whether some of the extra expenditure planned by Bristol Water-such as that to 
repair mains and reduce leaks-is necessary to maintain its quality of service 
and will ultimately benefit customers. 
We have looked critically at the projects proposed by Bristol Water, conscious 
that any decision to raise bills, even only modestly, should only be taken after 
very careful consideration. We have agreed to some of the extra expenditure, 
which will mean a small rise for customers above the price limits set by Ofwat, 
but equally we have also rejected several other projects, which would have 
further increased bills, as well as upholding Ofwat's judgment in a number of 
other areas. 
The CC looked in detail at the various components used in setting the price 
limit, assessing submissions and information supplied by Bristol Water, Ofwat 
and third parties including CCWater, as well appointing its own independent 
engineering consultants. The work included assessing several specific projects 
to maintain and improve service quality and resilience; looking at how Ofwat's 
methodology for ensuring efficient and well planned expenditure had applied in 
Bristol Water's case; assessing operating expenditure on costs such as pensions, 
bad debts and energy and coming to a decision on Bristol Water's cost of 
capital. The CC has also confirmed that its cost of capital should be 5 per 
cent, which is slightly lower than the figures proposed by Ofwat (5.5 per cent) 
and Bristol Water (6.7 per cent). 
Notes for editors 
1.    The CC has been required to determine 'K'. K is the percentage by which 
Bristol Water can increase its bills above inflation (RPI) each year. K for each 
of the years in the five-year period is shown below: 
+----+---------+---------+---------+---------+---------+ 
|    |2010/11  |2011/12  |2012/13  |2013/14  |2014/15  | 
+----+---------+---------+---------+---------+---------+ 
| K  |  0.6    |  3.9    |  3.9    |  3.9    |  3.8    | 
+----+---------+---------+---------+---------+---------+ 
 
2.    As noted, since Bristol Water has already issued bills for 2010/11, the K 
for 2010/11 matches that set by Ofwat, and the increase that results from the 
CC's determination has been smoothed over the following four years. 
3.    This final determination provides somewhat less money to Bristol Water 
than the CC allowed in its provisional findings. 
4.    The CC is an independent public body, which carries out investigations 
into mergers, markets and the regulated industries. 
5.    The Water Industry Act 1991 requires Ofwat in accordance with the terms of 
Bristol Water's licence to refer any disputed determination of price limits to 
the CC for determination. 
6.    Ofwat's final determination is at 
www.ofwat.gov.uk/pricereview/pr09phase3/ 
det_pr09_finalfull.pdf. Bristol 
Water's appeal 'in a nutshell' is at 
www.bristol-water.co.uk/uploads/news/nutshell.pdf. 
7.    The members of the Bristol Water Appeal Group are: Laura Carstensen (Group 
Chairman), Roger Davis, Richard Farrant, Professor Robin Mason and Edward Smith. 
8.    Enquiries should be directed to Rory Taylor or Siobhan Allen or by ringing 
020 7271 0242. 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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