Water firms in refunds storm

Companies told to repay customers over poor service

IAN MacKINNON

Ofwat, the water industry regulator, may press the Government to introduce new legislation to force suppliers to pay compensation for poor service, if it fails to respond adequately to calls for pay-outs over current hosepipe and sprinkler bans.

The carefully couched threat came after a day when the watchdog and the privatised water companies traded blows over whether the companies had an obligation to compensate customers.

Ofwat maintained that a framework agreement signed by all but one of the water companies in April tied them to making financial recompense for service restrictions now being suffered by 18 million consumers.

But the water suppliers robustly defended their position, arguing that they were meeting their legal obligations even during the present drought, and that the agreement specifically excluded exceptional weather conditions.

As the row rumbled on, however, Wessex Water broke ranks, saying that it would make pay-outs to customers if services were interrupted or restricted, although it had imposed no restrictions so far and did not envisage any.

Similarly, South West Water said it would be paying compensation to customers after about 250,000 people were forced to boil supplies following the outbreak of a stomach bug on Monday.

Ironically, the increasingly heated dispute over the lack of water came as many parts of the country experienced their first significant rainfall in almost a month, although the water authorities said that it would take many months to replenish the diminished water levels in reservoirs in areas suffering shortages.

Respite for the gardens, at least, might be at hand. The London Weather Centre said that yesterday's scattered heavy showers are expected to last for a few days, and would spread eastwards. There is a risk of heavy thunderstorms in the Midlands, East Anglia and the south-east.

Ofwat's deputy director general, Alan Booker, went on the offensive after some water companies appeared to back-track on the obligations in the document that they signed earlier in the year.

Companies are already legally obliged to make compensation - pounds 10 for loss of service for each 24 hours - under the Guaranteed Standards Scheme that was introduced in April 1993.

But to acknowledge their duty to their customers, and in a nod to the market, Ofwat secured their agreement voluntarily to make compensation if they fell short.

The agreement stipulated that companies would make financial recompense if customers suffered "demonstrable inconvenience", which Ofwat interpreted yesterday as a hosepipe or sprinkler ban of a month or more, for those who normally watered their gardens.

"A number of companies signed up to the framework of principles," Mr Booker said.

"Some are now saying they do not want to pay compensation and that's very disappointing. We hope they will take a hard look at the services they have been providing for customers over the last few weeks. They should look at their failures and come up with a scheme for compensating their customers."

An Ofwat spokeswoman went further, saying that it had the option of urging the Secretary of State for the Environment, John Gummer, to extend the Guaranteed Standards Scheme to give elements of the framework principle legal force.

"We can push for this very strongly," the spokeswoman said. "If we look at this situation and think perhaps there are not reasonable grounds for restrictions, then we would consider recommendations to the Secretary of State."

Ofwat also has the power to punish water companies for poor service when it sets price limits, but the next opportunity to do that will not come before 1999.

But the call for immediate compensation was echoed by Frank Dobson, Labour's environment spokesman. "If the companies' management of their water resources is such that they don't actually deliver the water that people want, then the people who don't get the water they want should be compensated."

But Bob Armstrong, the customer-services manager for North West Water, said: "The hose-pipe ban is a specific response to a problem of water supply caused by the exceptional circumstances of the current summer. Under those circumstances we don't think compensation should apply."

Graham Leftwich, of Severn Trent, which has imposed a hose-pipe ban on its 7 million customers, said that this restriction did not amount to an interruption of service or mean that people were paying for a service that they were not receiving.

"We don't agree that the hose-pipe ban is covered by the framework of principles," he said. "We are quite clear that the agreement clearly excluded hose and sprinkler bans."

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