LONDON (ShareCast) - Customers in England and Wales can expect their water bills to drop about 5% between 2015 and 2020 in real terms as part of Ofwat's price review.

The news was announced on Friday as part of the draft determinations published by the water regulator in response to the latest business plans submitted by water companies including listed groups United Utilities and Severn Trent.

Ofwat has already consulted on the draft determination for South West Water, which is owned by the other market-listed utility, Pennon Group.

Chief executive of Ofwat, Cathryn Ross, said: "This is good news for customers - with bills held down and better service.

"Delivering for customers rather than ticking regulatory boxes will drive what companies do over the next five years.

"Some will find this tough, but companies which really stretch themselves will reap the benefits of increased customer trust and confidence."

For Severn Trent, the average bill is expected to drop from £325 to around £290, while Ofwat said it was unable to give an estimation for UU because of "the material gap" between its view and the company's view of its wholesale costs, which it said made it difficult to indicate bills well.

Of all the companies, at £217m UU was found to have the biggest gap between its estimation of wholesale water and waste water spending compared to Ofwat's.

Severn Trent had the lowest view of the costs for waste water alone compared to the regulator's, while UU's view was the highest at £773m.

Ofwat did say that in terms of cost to serve, UU "was able to demonstrate that the impact of bad debt was material, beyond management control and that it was materially different from the rest of the sector", and as such the regulator agreed to adjust its figure to reflect this.

Both Severn Trent and UU had cost increments included in their plans, although Ofwat said it would seek further evidence of this ahead of the final determinations.

Chief regulation officer Sonia Brown added: "Some companies provided excellent, customer-focused plans. Others did not include sufficient evidence to justify their plans, and so we stepped in to make sure customers get a fair deal. These are draft decisions and things could still change.

"Companies will be looking hard at where they need to submit new evidence and we will also continue to challenge hard to make sure our final decisions result in the best possible deal for customers."

Responses to the business plan have to be submitted by 3 October following a five-week consultation process.

NR

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