WATER COMPANIES could be miscalculating their maintenance budgets by as much as 15%, regulator Ofwat claimed this week.
Ofwat wants them to scrap the use of Modern Equivalent Asset Valuations, currently used to assess maintenance needs, for a more accurate method.
'We are in some doubt about the value of Modern Equivalent Asset Valuations. They are not used in the regulatory field at all, ' said Ofwat chief engineer Bill Emery. He claimed that MEAV calculations can produce inaccuracies of up to 15%.
'We are saying to the water companies: 'get the economics right, and we have an open mind', ' he said.
Ofwat was responding to a report by consultant Chris Binnie for water companies trade body Water UK last month. Binnie's report claimed the pricing regime devised by Ofwat underestimated maintenance investment needs (NCE 29 June).
The report criticised Ofwat's claims that pipe bursts were 'stable', as their calculations were based on burst rates which had fallen as a result of pressure reductions and mild weather conditions.
But Emery hit back, saying: 'There is an argument that pipe condition is getting worse, but companies are still meeting their operational requirements'.
The Water UK report also said that several water companies were unhappy with Ofwat's £1.26bn total capital maintenance allowance for the 2000/2001 to 2004/2005 period, as this represented less than 1% of the total £127bn infrastructure value.
Water UK will hold a conference on 26 July to discuss the issues raised in the report. Contact Julie Fitzsimmins on (020) 7344 1844 or at email@example.com.