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Ofwat may ditch five year pricing regime

WATER REGULATOR Philip Fletcher is considering scrapping the five year pricing regime to help water companies plan infrastructure investment more efficiently.

Currently water companies have to provide infrastructure spending plans to Ofwat every five years. These are used to justify above inflation price increases.

In a consultation paper published this week Fletcher hints that the five year review system may be coming to an end.

'We seek comments now on the issues we should consider in weighing up whether the following price review (from April 2010) should be somewhat longer than five years, ' says Fletcher's Setting price limits for 2005-2010 paper.

He adds that this would allow water companies to plan investment over a longer period.

It would also help them provide a steadier flow of work to suppliers.

Suppliers often complain that the five year review period leads to peaks and troughs in water company investment. Money is initially held back before suppliers are flooded with projects as the review period nears an end.

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