Water body says bills may double in 8 years

Average water bills could rise to pounds 250 by 2000 at today's prices compared with the current average bill of pounds 170 because of tightening environmental standards, according to the industry watchdog, Ofwat.

Ian Byatt, the director general of Ofwat, said that taking inflation into account, average bills could double by the end of the decade. By 1994 they will be pounds 185 in today's money, or about 1 per cent of average household income.

Mr Byatt said that environmentalists and policy makers often failed to assess the true cost of implementing environmental regulations, particularly those 'vaguely formulated' in Brussels.

'I think that there is an issue of health here and an issue of perfection. Some of the standards are going very far into the realms of perfection,' he said.

According to Mr Byatt, standards set in the EC directive on trace pesticides in drinking water were 'rather like dropping an aspirin into an Olympic swimming pool'. The water pesticides standard was 20,000 times more stringent than pesticides standards for some vegetables. Just because we do not meet EC directives absolutely does not mean water is poisonous.'

He said initial cost estimates of imposing new standards tended to escalate. The Government said in 1990 that improvements in sewage treatment to meet the EC Urban Waste Water Treatment Directive would cost pounds 2bn but industry now puts the cost at pounds 10bn.

Mr Byatt said that it was not up to Ofwat to decide on standards but to estimate what they could cost and leave environmentalists and policy makers to say why they were needed. But he is attempting to stimulate a public debate on the cost of water quality as part of his forthcoming review of water companies' prices.

The formulae controlling price increases come up for scrutiny in 1994. Ofwat's price review will take into account a range of environmental initiatives proposed or adopted since the water companies were privatised, as well as the ability of companies to become more efficient. He will also look at what rate of return water companies should be able to make.

Mr Byatt said that the industry could have to spend pounds 45bn at today's prices in the 10 years from 1995 - when the new price formulae took effect. This includes only about pounds 13bn of the pounds 30bn which the Government originally envisaged the industry would have to invest, mainly on improving water quality and cleaning beaches.

The regulator has asked companies to tell him by Easter what the impact will be on their individual businesses and their customers' bills. Because meeting standards is more costly for some companies than others, he warned that customers in some parts of the UK could soon be paying pounds 100 above the national average. Companies should seek their customers' views on what they are prepared to pay.

'Customers want higher quality water but they are concerned about bills. The issue is particularly acute when much of the cost is incurred in making high standards higher still. Customers might ask whether the drive for higher quality should go so fast.'

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