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Ofwat criticised for failing to punish water companies

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WATER INDUSTRY regulator Ofwat this week defended its performance after MPs criticised it for being 'slow to take action' against under performing water companies.

The Commons Public Accounts Committee accused the regulator of being slow to punish firms such as Thames Water, which has missed leakage targets, and United Utilities which has breached its licence conditions.

'We are pleased with the action we have taken. With Thames Water we didn't fine them, we boxed clever. The maximum fine would have been £70M, and that would have gone straight to the Exchequer, ' said a spokesman.

'That would not have done customers directly any good.' Instead the regulator ordered the water company to spend an additional £150M on leakage reduction without recouping the money from bill payers.

United Utilities (UU) was ed £8.5M earlier this year for awarding work to in-house firms without putting it out to competitive tender.

Under its licence, United Utilities Water must market test for services that it procures from companies it owns.

'We can fine up to 10% of turnover and this [fine] was about 0.7% of UU's turnover - 10% would be a nuclear option.

We think that £8.5M is a lot of money. Network Rail were only fined £4M for the Paddington rail disaster, ' said the spokesman.

The committee also criticised the regulator for 'depending on unreliable data with regard to both supply and demand'.

'Consumption estimates vary substantially, even within the same region. Three Valleys Water estimates that each individual uses 177 litres of water per day, while nearby Tendring Hundred estimates the corresponding figure as 124.

'Ofwat should require companies to use consistent figures for measuring consumption.' The regulator acknowledged that measurements varied.

'Metering is only at 28% at the moment. Tendring have over 60% so their gures are likely to veer more towards accuracy.' Consumption gures are based on a mass balance equation looking at total water supplied versus measured use, and assumptions for customer use where meters are not in place.

'We are doing joint research with Department for the Environment Food & Rural Affairs and the Environment Agency which is part of the leakage targets review, said the regulator. 'It will consider methodologies for calculating per capita consumption.' The report is due to be published in early July.

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