UK Private Water Customers Majorly Overcharged

According to a recent report from the House of Commons’ Public Accounts Committee (PAC), private water customers have been overcharged by in excess of £1 billion with help from the regulator Ofwat, and they are screaming mad.

The privatisation of English and Welsh water supplies is a legacy of the Thatcher administration, with 8 private companies, including global names such as Citibank and HSBC and Asia’s richest man managing the water and sewage resources.

According to the report, Ofwat, which estimates the costs involved and sets 5 year price limits for charges by the firms, has consistently overestimated financial costs and denied customers a fair deal.

A 2001 study by the Public Services International Research Unit found that tariffs increased by 46% during the first 9 years of privatisation, and the water companies’ profits have increased by 142% in 8 years.

The PAC report also found that bills were higher than they needed to be, investments were reduced, Ofwat consistently over-estimated water companies’ financing and taxation costs when setting price limits, and cut-offs for non-payment of water bills is jeopardising the health of those individuals.

The report states that due to Ofwat’s failure to adjust for corporation tax charges, water companies have made in excess of £1.2 billion between 2010 and 2015, with no benefits being shared with customers.

Ofwat has, in light of the windfall, asked the water companies not to increase tariffs, but only 10 of the 18 largest companies have so far agreed to do so. Last year the average household paid just under £400.

The committee of MPs says that many householders would be appalled to find out how much they have been overcharged, and has stated that they are worried about customers in water-scarce areas being charged to develop new capacity despite the future possibility of water trading between companies.

PAC chairwoman Meg Hillier said: “Ofwat was set up to protect the interests of customers, most of whom have no choice over who supplies their water yet must pay bills typically running to hundreds of pounds. Many householders will therefore be appalled to learn these bills could have been smaller had Ofwat adopted a different approach to setting price limits for water companies. This approach must be reviewed as a priority.”