Letter: Regulating the cost of water services

Sir: Your comment, 'A closer look at the regulators overdue' (View from City Road, 13 September), says that South West Water has only appealed to the Monopolies and Mergers Commission because my methodology has an abnormally harsh effect on the company. The Commission will doubtless look at this.

I contend that the methodology was applied fairly and consistently to all companies. I provided evidence for this in Future Charges for Water and Sewerage Services, the document which not only set out my methodology but also the numbers - for capital investment, for return on capital and for efficiency savings.

You suggest that the scope for cost-cutting in the companies has been underestimated. I would be interested to know on what or whose evidence you base your view. The basis for my judgement was explained publicly.

I consulted widely before deciding what was an appropriate level of return for the industry as I did on every other major aspect of my review. The process was also made public.

IAN BYATT

Director General

OFWAT

Birmingham

14 September