Winter legacy of leaks chills water giants

By Jon Rees
Updated: 06:04 EDT, 15 May 2011

The bitter winter may cost water companiesms of pounds for breaking leakage targets imposed by regulator Ofwat.

United Utilities, which reports annual results in the next fortnight, is understood to have missed its leakage targets for the year, according to industry sources.

The company refused to comment but has admitted that leaks 'increased very rapidly' by about 200m litres a day during the worst of the weather.

Ofwat has the power to fine firms that fail to meet leakage targets up to ten per cent of their turnover.

In recent years it has taken action against companies for failing to meet targets by securing agreements that forced Thames Water to spend £150m of shareholders' money to improve performance while Severn Trent committed £45m.

It is likely that a number of other leading operators will fall foul of regulations and they are expected to make announcements when the leading stock market-listed companies - United, Severn Trent, Northumbrian and Pennon - unveil their annual results in coming days.

Shares of the listed firms have risen steadily as investors seek to benefit from an industry with an inflation-linked pricing regime.

Over the winter, all the leading suppliers were hit hard with tens of thousands of households affected by frozen and burst pipes. Water firms in England and Wales did not perform as badly as Northern Ireland's State-owned supplier, which was unable to supply thousands of customers for days at a time.

United Utilities, which owns North West Water, took 46,000 calls between Christmas and New Year, ten times its usual amount. More than 112,000 customers contacted Severn Trent against a forecast of 35,000, while Thames Water received 103,000 calls in December compared with 58,000 the previous December.

Six companies failed their leakage targets last year and have been put on a watch-list by Ofwat - Southern, Northumbrian, Veolia Central, Dee Valley, Cambridge and Yorkshire.

Yorkshire Water recently pledged £33m for reducing leaks.