LONDON Nov 8 Britain's water regulator blocked
an 8 percent price hike proposed by the country's biggest water
company, Thames Water, taking action against soaring household
utility bills which have risen up the political agenda.
Utility bills have become the subject of national debate
since several energy firms unveiled sharp price increases and
the opposition Labour Party promised a freeze on bills, fanning
wider concerns among voters about the rising cost of living.
Regulator Ofwat confirmed in a statement on Friday that it
rejected Thames Water's bid to raise charges by almost three
times the rate of inflation for 2014-15, something it said in
October that it planned to do so.
"We said we would challenge Thames' application, in the
interests of customers. We did just that and on the evidence
provided we are not convinced that an extra bill increase is
justified," Ofwat chief regulation officer Sonia Brown said.
Thames Water, which provides water and waste services to 14
million households in and around London, can make an appeal to
Britain's competition authorities, Ofwat said.
"We will review the decision carefully before deciding on
our next steps," Thames Water said in an emailed statement.
Water pricing could face the same political scrutiny as
energy bills after Prime Minister David Cameron said last week
that he would take action to help households struggling to meet
rising water bills.
Four of Britain's six biggest gas and electricity companies
have over the last month raised their prices by between 8.2
percent and 10.4 percent.
Late last month lawmakers summoned the firms to justify the
increases, which energy executives blamed on wholesale prices,
other costs and levies linked to government programmes, brushing
off allegations of market rigging.
The British government on Tuesday wrote to the country's
biggest water companies, asking them to reconsider looming price
hikes as households have been squeezed by a decline in real
Thames Water had said the price rises were necessary to help
cover the cost of bad debts, which had risen in the economic
downturn, and higher costs than it had forecast.
Water companies need the permission of Ofwat to raise prices
beyond limits set by the regulator for five-year periods. The
companies are due to submit their plans for the next five-year
period from 2015 to 2020 in December.
Ofwat said in its statement that there was scope for water
companies to cut bills from 2015 and should they not propose
reductions, they would need to explain why.
Shares in Britain's main listed water companies Severn Trent
and United Utilities, both members of the FTSE
100, and Pennon were all trading up between 0.2 percent
and 0.9 percent on Friday morning.
Thames Water, which is owned by a group led by Australian
investment bank Macquarie and including the China Investment
Corporation, was permitted to raise prices by 1.4 percent above
inflation for 2014/15.
However in August the unlisted utility said it wanted to add
a further 8 percent, the equivalent of an extra 29 pounds
($46)on the average bill of 354 pounds a year.