Headlines: August 26th, 2003

Water companies are making the investments necessary to deliver environmental and water quality improvements, according to a report from the regulator, Ofwat, which looks at the companies’ performance over the last financial year compared with Ofwat’s expectations when the current price limits were set. But the regulator is concerned that there is still much work to do to meet some targets by 2005.’Financial performance and expenditure of the water companies in England and Wales 2002-03′ gives details of the companies’ financial position. It says that at industry level, capital expenditure for the period was 3.45 billion pounds – up by 13 per cent on the previous year. Capital expenditure for the first three years of the period was 9.3 billion, significantly lower than the 11.2 billion pounds projected in the price limits.

The report says the companies attribute about half of this difference to capital efficiency, with most of the remainder due to rephasing work on the quality programme. This has left them with a large part of the environmental improvement programme to complete in the next two years.

Capital maintenance investment increased by 12% compared to 2001-02 and is at its highest level in the current regulatory period. For the first three years of the period, capital maintenance investment was close to the amount assumed in price limits.

Philip Fletcher, Director General of Water Services, said, “”The overall financial performance of the water companies shows that they are responding to the challenges set for them at the last price review.” But he added, “The companies face a challenge in terms of the number of schemes still to be delivered by 2005.”

Ofwat and the Environment Agency will be seeking assurances from the water companies that the full five- year National Environment Programme will be delivered on time.”

The report includes an assessment of each company’s water and sewerage network system. It says water mains and water treatment works remain ‘stable’. The number of properties subject to low pressure is continuing to fall. The sewer system has improved to ‘stable’ from the ‘marginal’ assessment last year. But above ground waste water assets moved from ‘stable’ to ‘marginal’ because some sewage treatment works have failed the effluent treatment standards set by the Environment Agency. Ofwat will continue to monitor companies’ performance and expects each of them to demonstrate that it has action plans in place to address any serviceability shortfalls by 2005.