Application to Ofwat

5 Nov 2007 16:22

Bristol Water PLC05 November 2007 Bristol Water plc5 November 2007 Application to Ofwat for Review of Price Limits Bristol Water plc announces that today Ofwat has issued its Draft Determinationin respect of the application for a review of price limits made by Bristol Waterplc on 17 September 2007. Latest On Price Limits Change: Bristol Water Considers Ofwat Draft Decision 'Pleased Ofwat have recognised we are genuinely experiencing extra costs in specific areas'- BW MD. Bristol Water now has three weeks to consider today's draft decision byregulator Ofwat on how much prices can rise over the next two years. In September, Bristol Water asked Ofwat to review its charges for the next twoyears. This is allowed under rules that review price limits, up or down, ifcertain specified factors move significantly out of line from when the limitswere originally set three years ago. Ofwat's draft determination issued today provides for a real increase in averageprices from April 2008 of 4.6% followed by a real decrease of 2.0% in 2009/10.The effect of this would be average domestic bills for a year's water supply ofaround £145 in 2008/09 and £143 in 2009/10. Bristol Water's current average annual domestic water bill is some 6% lower thanthe average bill for English and Welsh companies and significantly lower thanthe average bills of some of Bristol Water's nearest neighbours. Even with theserevised price limits the average charge will remain below the national average. "We are pleased that Ofwat have recognised that we are genuinely experiencingadditional costs in specific areas and that the interim determination pricereview mechanism should be applied," said managing director Alan Parsons. "We are continuing to deliver excellent service levels to customers and by thetime of these price rises next year we expect to meet in full the challengingobligations required of us when Ofwat set the original price limits. "This year we will complete the largest ever investment programme in thecompany's 160+ year history. "We now need to study and reply to Ofwat's draft decision." Background - When setting price limits, Ofwat identified a number of uncertainties where, ifthe original assumptions proved to be wrong, price limits could be reviewed byan interim determination. In three of these areas Bristol Water is experiencing significant increases incosts: • the soaring number of domestic customers opting for a free meter• the level of bad debts i.e. customers not paying their bills• and water abstraction charges levied by the Environment Agency. Ofwat set price limits for all English and Welsh water companies for the fiveyears 2005-2010 back in 2004. These price limits are expressed as 'K' values andallow Bristol Water to increase (or decrease) its charges to customers eachApril by inflation +/- K. The price limits are based on a very detailed analysisof the costs and investments that companies are expected to incur to deliverservices to customers. Bristol Water is currently investing approximately £150m in capital projects tomeet the outputs set by Ofwat as part of the price limit process. These projectsare to maintain and enhance the company's assets over the five-year period toensure the maintenance of high levels of service to customers. One such major project, now nearing completion, is the Northern StrategicSupport Scheme, to improve the security of supply for a large number ofcustomers in northern Bristol. This scheme would have helped deal with the typeof water supply problems in Gloucester and Tewkesbury during this summer'sflooding. There will now be a period of public consultation and discussion between Ofwatand the company. Ofwat will then issue its determination by no later than 14December. If confirmed the new price limits will take effect from 1st April 2008and April 2009. --------------------------------------------------------------------------------For further information about this release, please call Jeremy Williams or PaulKelson on 0117 9536470 (office hours) or 07831 453924 or 07831 518964 (outsideoffice hours)-------------------------------------------------------------------------------- This information is provided by RNS The company news service from the London Stock Exchange