Thames Water 8% Price Hike Stopped By Ofwat

Britain's biggest water company has been stopped from imposing a price hike of 8% on its customers for 2014-15.

Ofwat, the water regulator, said the Thames Water price rise of £29 was not justified, despite the company saying the extra money was needed to fund the construction a "super sewer" under London.

The watchdog's chief regulation officer Sonia Brown said: "We said we would challenge Thames' application, in the interests of customers.

"We did just that and on the evidence provided we are not convinced that an extra bill increase is justified."

This announcement is Ofwat's final decision on the application.

Thames Water now has the right to trigger an appeal to the Competition Commission. The company told Sky News it was reviewing the decision by Ofwat.

The decision by Ofwat means the maximum that Thames Water can add to customers' bills for 2014-15 is capped at 1.4% above inflation, as set in the 2009 price review.

 Thames Water had submitted the application to Ofwat for an interim adjustment to prices over the current five-year price period.

The firm, which is privately owned by a global consortium led by Australia's Macquarie group, said it has spent £273m on acquiring land needed for the construction of the Thames Tideway Tunnel.

It also said bad debt as a result of the economic slowdown had prompted the application.

Ofwat criticised Thames Water over delays to a sewage treatment programme

In September, Ofwat criticised Thames Water over the application, saying it had made "substantial savings" by doing less than expected to tackle sewer flooding.

A major investment programme in sewage treatment has also dragged on too long, it added, despite customers being charged for the improvements.

Last week, Ofwat chairman Jonson Cox wrote to all water companies asking them to consider whether they needed to increase their bills for 2014-15 by the full amounts set in the last price review.

On 2 December, companies will submit their business plans for the next price review, which will cover the period from 2015 to 2020.

Ofwat has called on these plans to reflect their customers' priorities, and believes there is scope for reductions in bills from 2015.

If companies do not propose reductions, they will need to fully explain to their customers why.

Mr Cox told the firms that Ofwat will set 2015-20 prices using an independent, rigorous process, ahead of a final decision is due on these prices by January 2015.

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