Letter: No hand-washing at Ofwat

Sir: Your report and comment on transfer pricing in the water industry lack all perspective. Far from prejudicing water customers' interests, the creation of non-regulated subsidiaries which are able to sell their services in the free market has preserved and created jobs while providing services to the regulated companies more cheaply than they could have done themselves.

This hardly amounts to damning evidence of malpractice, and the water companies rebut categorically accusations that they have "syphoned money" from their regulated businesses for the benefit of their non-regulated subsidiaries.

Much is made of the companies' limited resort to competitive tendering when a subsidiary bids for business from its regulated associate. Yet competitive tendering is only one of four methods of market testing recommended in Ofwat's current guidelines, with no view expressed as to which the regulator prefers. All the water companies have routinely followed one or other of these practices.

JANET LANGDON

Director, Water Services Association

London SW1