Cathryn Ross response to Financial Times article
Cathryn Ross has responded to an article on water privatisation that was published in the Financial Times on Sunday 10 September.
Your article ‘Water privatisation looks little more than an organised rip-off’ (10 September) has failed to recognise how Ofwat works to protect customers of monopoly water companies. As the Regulator, the customer’s interest is central to everything we do.
Contrary to the suggestions in the article, the prices that customers pay are rigorously safeguarded by Ofwat through 5-yearly price reviews. When determining price controls, we do not allow companies – including Thames Water – to pass on the costs of their financing arrangements beyond that of an efficient notionally-structured company. Far from taking ‘no interest in companies’ capital structures’, as the article claims, we actively collect and analyse information on water companies to monitor their financial health and to identify any potential risks which may impact on service delivery and prove harmful to customers.
We publish such information annually to allow all stakeholders to compare the performance of companies across the industry. Companies must be financially resilient, both now and in the future and such resilience should be tested and reflected in companies’ published long term viability statements. Companies have to act when this is threatened. Yorkshire Water for example, has made changes to its capital structure through de-leveraging its balance sheet and reducing its interest costs this year. As a result, Moody’s Investor Services changed Yorkshire’s credit rating expectations to stable on 5 July.
We take very seriously our duty to deliver the best outcomes for customers and society and we have never shied away from holding any water company to account – our record in this regard speaks for itself. We took action against Thames Water in 2014 for misreporting and secured a package worth £86 million for its customers. Following our intervention this year after a spate of serious bursts, Thames will invest almost £100 million more to improve its trunk mains assets. In June, Ofwat’s Chair, Jonson Cox, publicly called on Thames Water to make a series of changes, including demonstrating that management rewards give appropriate weight to performance for customers’ as well as financial performance, and ‘explaining transparently how those performance standards are set and assessed each year. Thames Water has now responded positively to this call, and we will be seeking changes from other companies in the same vein.
Chief Executive, Ofwat (Water Services Regulation Authority)
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