United Utilities joins host of water groups to reject Ofwat proposals

published 23 November 2012

United Utilities has spoken out against Ofwat's licence proposals for the water sector, saying that they are not in the best interests of customers, investors and shareholders.

Industry regulator Ofwat released a statement on Tuesday evening that sought to clarify some licence modification proposals following requests for more information from shareholders.

"UUW's [United Utilities Water] principal concern is that the extent of flexibility in Ofwat's current licence proposals would create unnecessary and prolonged uncertainty for investors, with the potential for this uncertainty to impact customer bills," the company said on Friday afternoon.

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"UUW is committed to continued positive engagement with Ofwat to support the progressive evolution of regulation in the water industry. The company's proposals include the licence changes necessary to facilitate the forthcoming price review in 2014 and the development of retail competition for business customers."

The announcement follows sector peer Severn Trent's statement released this morning in which it declared that it too believe it "would be better if the current proposals were modified".

Yorkshire Water also voiced concerns with Ofwat's proposals today, saying that it was "with regret" that it had to reject the changes.

The group said: "there were still serious concerns about the scope of the modifications which were undermining investor confidence. This could lead to higher borrowing costs, which would drive up customer bills unnecessarily."

Ofwat said in its press release earlier this week: "The challenges facing the sectors means there is a need for new, innovative ways to deliver sustainable water. Flexibility is needed in the licence since it is one of the key tools of regulation so that we, as regulator, can adapt to changing circumstances."

The regulator said that this flexibility would allow it to set segmental price controls and targeted incentives.

However, it did welcome "constructive" responses if they have concerns with the proposals. If some companies don't accept the proposals, then the matter will be referred to the Competition Commission (CC).