UK: Water company mergers may give customers a better deal

A more flexible approach to mergers between water companies could release significant cost savings for water customers against a background of rising bills over the next five years, according to the independent industry watchdog agency WaterVoice...

LONDON, United Kingdom, Nov. 1, 2004 (GNN) -- A more flexible approach to mergers between water companies could release significant cost savings for water customers against a background of rising bills over the next five years, according to the independent industry watchdog agency WaterVoice.

In its response, issued today, to the Competition Commission's proposed guidelines on water mergers, WaterVoice said that restructuring of the industry could release significant cost savings for customers and urged changes in the approach to proposed mergers between water companies.

Maurice Terry, WaterVoice Chairman, said: "WaterVoice wants the very best long-term deal for water customers in terms of price, service and value for money. Bigger doesn't always mean better, but some mergers may help to deliver a better overall package.

"The regulatory approach to mergers should be flexible: it is the quality of the water company comparators that is important, not the absolute number of companies available for comparison in the water sector. The companies resulting from any future mergers may be of better quality and distinguish themselves as leaders in their field."

Individual mergers need not mean a significant loss of information for the UK Office of Water (Ofwat) in comparing performance within the water sector, WaterVoice said. In 2002, when Vivendi attempted to acquire Southern Water, the Competition Commission recommended that Ofwat should begin to use and collect sub-company data (for example, in a particular geographical area within the company's region) to offset the loss of a comparator company.

Sewerage companies already provide sub-company data to Ofwat to help in its analysis of sewerage services. WaterVoice believes this should be extended to all companies providing water services.

Terry said: "It is time to examine the availability of reliable, robust and more sophisticated ways of assessing the relative efficiency of companies in the water industry."

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