UK Council: Money should go to customers, not treasury

In September 2007 Ofwat announced that it intended to fine Thames Water £12.5 million for providing inaccurate customer service information to the regulator and failing to pay compensation to almost 8,000 customers. It began a period of consultation so that the company and other interested bodies, and the public, could comment. The Consumer Council for Water questions the suitability of a fine which hands over the money to the Treasury, as opposed to using it to benefit Thames customers...

Jan 16th, 2008

LONDON, Jan. 11, 2008 -- Thames Water is to be penalised for misreporting information and failing to pay compensation, but the Consumer Council for Water questions the suitability of a fine which hands over £12.5 million to the Treasury, as opposed to using it to benefit Thames customers.

In September 2007 Ofwat announced that it intended to fine Thames Water £12.5 million for providing inaccurate customer service information to the regulator which is ultimately used to set water prices, and failing to pay compensation to almost 8,000 customers, and it began a period of consultation so that the company and other interested bodies, including the Consumer Council for Water, and the public could comment.

In response to the consultation, the Consumer Council for Water agreed that Thames should be penalised but that customers should benefit rather than the Treasury. This view was also supported by other respondents,* but by law any fine imposed by Ofwat must go to the Government's coffers.

It is possible for the benefits to go to customers as in 2006 when Thames missed their leakage targets they agreed with Ofwat to make an additional £150 million investment in their pipes to benefit customers, which is more than double the maximum possible fine the regulator could have imposed.

However, Ofwat recently announced (9 Jan. 2008) that there has been no shift in their position and they will continue with the fine, with the money going to the Treasury and not back to customers.

David Bland, Chair of the Consumer Council for Water in London and the South East, said: "We accept that the company should be penalised but are disappointed that customers will not benefit if Ofwat continues along these lines.

"Water companies do not get revenue from tax payers therefore we feel strongly that Thames customers, not the Treasury should benefit from Ofwat's decision, and that the fine should be drawn entirely from shareholders' funds. We responded with these points to the first consultation and will do so again."

Ofwat has now started a second round of consultation for comment by 5pm on 6 February 2008 to which the Consumer Council for Water will respond.

The Consumer Council for Water represents consumers in England and Wales and is the statutory water consumer body, and operates as a non-departmental public body reporting to the Department of Environment, Food and Rural Affairs and the Welsh Assembly Government. It has a committee for Wales, and at local level is supported by four regional committees in England.

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