Ofwat 'ignoring consumers' costs'


Regulators do not appear to be taking account of the overall effect of bill increases on the cost of living and are excluding customers from their deliberations, an MP has suggested.

Labour MP Austin Mitchell challenged Ofwat and Ofgem to disclose how they involved water and energy customers in their deliberations over companies' pricing and investment proposals when they appeared before the Commons Public Accounts Committee.

Ofwat chief executive Cathryn Ross said: "We are absolutely taking affordability into account when we look at companies' business plans and we have challenged companies very hard to understand their consumers' position on affordability and to respond to that in what they propose to do."

Mr Mitchell replied: "But you don't take any account of the way consumers are being struck by other utilities. You're just looking at the affordability of water."

She said: "I would accept some truth in that. The way in which it does happen is when companies are going to customers and basically saying, 'Look guys, here are things that we can do that will cost a bit more, are you willing to pay for that or not.' That customer is answering with an eye to the other bills that they think they are going to have to pay.

"So there is some way in which that is captured.

"But at the end of the day when we produce our final determinations for prices, are we doing that consciously looking across expected energy bills, expected rail fares and all the rest of it? No, I'm afraid not."

Ofgem's interim chief executive Andrew Wright said: "We require companies to understand what consumers' priorities are. That will take account of how consumers are feeling, their willingness to pay for improvements and so on.

"And so in that way affordability is taken into account in the process.

"Exactly the same as Ofwat, we've required companies to demonstrate that they've had that engagement, that their business plans take account of what consumers are telling them, and in a similar way we will only approve the business plans when we're comfortable that that's happened.

"I think we recognise the shortcomings in that, that is consumers don't necessarily themselves have a full view of all the pressures on bills that may be coming down the road at them, particularly when you're looking at long term infrastructure investments where impacts on consumers' bills are being locked in for many years in the future."

Committee chairwoman Margaret Hodge opened the session with an angry attack on Npower for failing to send its chief executive Paul Massara to answer questions on the effect of infrastructure investment on its customers' bills, after learning that he had "done the rounds" of media earlier in the day promoting the company's Energy Explained report.

Directing her questions at Npower's director of policy and public affairs Dr John McElroy, she said: "What is he doing that is more important than accounting for himself through Parliament to his customers? Where is he now?"

Dr McElroy answered: "I am not exactly certain where he is now. He has a very congested diary.

"I hear what you say but he has a very difficult diary and it is not always possible to rearrange things at very short notice."

Mrs Hodge said: "He is here (in the country), and he has chosen not to be here, and I don't think we take to that very kindly."

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