Water, Ofwat and Meters (Water in general)

Member Name: makro74

Product:	Water in general
Date:	16/09/08 (114 review reads)
Rating:

Advantages: Beatiful when taken care of

Disadvantages: Commercilised commodity - expensive for average households

Water is a product hydrogen colliding with oxygen twice. It is, and has been on Planet Earth in abundant supply before the existence of humans. Yes it has to be managed, especially where it is scarce, but generally in the world there is no shortage.

Water is essential to life on the planet, without water it is unlikely anything can survive. So why then should we take this resource for granted. When we pick up a glass of water, we drink it if we a thirsty, but if full we are also ready to throw it away without a second thought.

In the United Kingdom, the water issue is one of distorted fact and pathetic greed displayed by over-zealous politicians and ever business hungry company bosses.

OFWAT AND THE WATER COMPANIES
The Water Services Regulations Authority, set up in 1989 as a government body to protect the consumer interest from the monopoly practices set up by the 10 private firms created as a result of privatisation.

These were different to the 'water only' companies which provided water services privately before 1989, but not dealing with sewarage or other aspects of water.

Up until April 2006, regulatory powers rested with the Director General of Water Services. The 'office' from which he/she worked was known as Office of Water Services - hence the abbreviated name OFWAT.

After April 2006, the Director was replaced by the Water Services Regulation Authority hence the Office was disbanded but OFWAT is still used.

Ofwat is the body which monitors prices charged by the companies and has a board of around 9 members. These people carry out reviews on pricing and structure of the companies and justification of practices. The latest review was in 2004 and the next will be 2009.

Through the Drinking Water Inspectorate - the Environment Agency is responsible for the quality of the water. In Scotland, it is the Water Commission for Scotland as the regulatory authority.

Ofwat do have a website called www.ofwat.gov.uk which provides information about practices and standards of the body.

DOES OFWAT ACTUALLY PROTECT THE CONSUMER???
Whilst their is much more to review on the actual body and setup of OFWAT, I have to continue this review in the context of how and does this body protect the interests of the consumer?
In theory the answer to this question is yes. This is because price increases have to be justified and presented to the board. But in practical terms, does this really work? The answer is categorically no.

Since 1989, prices have gone up in excess of 44% with and average rise year on year about 5-6%. Even with inflation factored in we see rises above the rate the inflation at times, by more than 100%. Is this justified??

LEAKS
The common gripe of water companies was that we need more money to invest in leaking pipes throughout the network, partly due to the lack of Thatcherite investment in the 80's meant many of the network was leaking due to aging pipes. Today, water is still leaking at 141million litres. Granted they have reduced from the 1996 peak of 244 million litres, but when the companies are making colossal profits running into millions and even billions, why then have these leaks not been eradicated in the last 20 years?

More importantly, why do OFWAT not have more 'teeth' to hit these companies harder. For example, Thames Water were only reluctantly fined in 2006, for missing its targets for repairing leaks consistently. In fact, a spokesman for OFWAT openly said 'Fining these companies is not the answer, as the fine just goes back into the Treasury'. Forgive me, but that slaps in the face of common sense.
CONSUMER COMPLAINTS
This is very interesting. A government body (OFWAT) is set up to protect the interest of the consumer. First, many people probably do not know OFWAT or where and what it is. This is because of the clever positioning of the body at a 'distance' from the consumer. You would be hard pressed to find contact details, even a simple public telephone to contact them. The reason is simple. Read on ....

1. Consumer Council for Water
This is yet another body set up, which is private, to deal with consumers and report on the pricing and difficulties faced by consumers. Moreover, they are setup to deal with escalating cases rather than first points of contact and hence they will refer you back to the company in question to resolve the issue first hand.
2. The companies
The water companies as monopolies, necessarily do not provide brilliant service. They will in many cases not listen to reason and force the issue. For example, a ten day billing period by Severn Trent arrives around 7 days from the date of issue leaving you with about 3 days to pay you bill! Naturally, my complaint escalated to the Consumer Council. But what did they do - they got Severn Trent to ring me within a 7 day period or they had to pay £20. On the 8th day, Severn Trent rang! I asked for the £20, and they said, we were asked to ring you 3 days ago and adament that they met their target. Enough said!

So where are OFWAT? By and large they seem to sit back, and hope that these complaints do not come their way. Moreover, their website seems to endorse price rises each year by plans provided by water companies, and they seem to singing the same tune. For example, their figures for bill rises is confusing since they are taking out inflation and presenting the bill rise as around 2-3%. This to the consumer is misleading, since their bills are rising on average by 6% each year regardless of inflation.
Another example are business plans presented to OFWAT. I have seen some of these, and quite frankly if you know something about balance sheets, and how to manipulate your assets and offset one against the other, then you can easily justify high costs and hence high prices. What the companies present to OFWAT is very close to fraudalent activity. Yet complaints are rife by consumers and OFWAT is happy that companies themselves are dealing with them.

COUNCIL TAX COMPARISON
Moreover, compare this with the council tax. Currently, it is rising at around 2-4% each year. The council provides far more services (roads, emergency, schools and refuse etc), yet it has a yearly figure per household which is in my case around £1100. The water bill is over £500! Can you see the difference? Is it justified? What is OFWAT doing to stop big profits and rising bills? Very little in my view.
TAXPAYER OR THE SHAREHOLDER?
The problem, is as we recently seen with the energy companies, governments and government bodies are very keen to see investors remain in the UK and companies not driven offshore because of harsh penalties on their profits. Then why on Earth did politicians privatise the companies in the first place? And why then, are consumers brushed aside because jobs and profits are to be protected as per the wealth and stability of the overall economy ??
This is why, I believe that the very fact there is a need for OFWAT and 10 monopolies is to pacify the public that a commodity as precious as water is safe in private hands. But private firms will be always maximising their profits, they are not interested in social values or consumer interests in the absence of competition and forced intervention. But creating monopolies of these sizes, it becomes harder for governments to keep control.

Remember, firms are there to make profits, that's why the private and public sectors are two distinct entities. Water is far to precious for anyone, I mean anyone to be able to pay bills.

STORAGE AND DISTRIBUTION
What baffles me about OFWAT, is there impotency to act on the water companies. For example, in the South of Spain, and Portugal, these are developed nations in the EU. Yet they have more than 300 days of sunshine ie no rainfall. So how do they manage their water supply. In a country, where we have abundant rainfall, and we are surrounded by seawater, rivers etc. Where I ask, is the investment for desalination plants, water towers, treatment plants and above all a water grid.
In the OFWAT website, it dismisses the idea of a water grid simply because there isn't one.

COMPETITION
In 2002, a review by OFWAT recommended that the market is currently not stable enough for competition, this is to be reviewed again. But again, I cannot see the justification to consumers but a benefit to the monopoly. For example, frustrated with Severn Trent, I cannot change suppliers, nor do I have any choice in the water I drink. I thought market forces were all about supply and demand based on choice and price.

WATER METERS
I thought, I'd give this a mention. OFWAT never tackles this issue. Water meters are expensive form of usage of water. Let me explain. If OFWAT were truly on the consumer's side, then it would make clear on its website what it entails as to the difference between metered and unmetered water.
1. Water meters are wrongly billed as being pay as you go. They have a standing charge, drainage charge and sewerage based on the size of your property. Whilst you pay for your usage, you get hammered as per the size of you property.
2. Children and large families tend to use more water. It is impossible to economise here unless you remain unhygenic. Rates are to high.
3. I am all for efficient usage of water, but the poor will be hit hardest and the rich will not hurt them at all.
4. It affects the value of the property as people are reluctant to buy a house with a meter fitted.

If meters are the way forward (which I don't necessarily agree) then OFWAT should be clear on hard on the prices and should be significantly lower than non-metered.

I just read an earlier review, which I thought I might just mention. In it, the review talked about meters as if it is what people should assume is cheaper simply because a couple living in 4 bed house went from £400 to £120 per year by switching to a meter. Now, this is the thing. In order to do this, what needs to be done.

First : No children
Second : Couple hardly at home
Third : 4 bed house for a couple! They are earning more than typical to pay for other expenses.
Fourth: No mention of standing or surface water
Fifth: This is not typical household
Sixth: Meters encourage this kind of antisocial living

So meters are only short term fixes for the above like couples, or single rich people - they seem to have the choice. But for families with children it makes no sense. Especially when they are per pence so expensive per meter cubed. Add on the surface and drainage you are paying as if you were paying without the meter ie the size of the house. Effectively, doubling your cost as you use it.

FINAL THOUGHT
For the purposes of protecting the consumer, the theoretical concepts in its inception of OFWAT are not without merit. But in practice, there is little appetite to go in hard on these companies - the Consumer Council itself is friendly and approachable, but is that what we need? We need a system which has excessive storage for water, a national grid, alternative methods of treatment and sources. We can then see some fruits of the investment.
Remember also, the pensioner, or the single mum - the tax credit system is not the answer - politicians need either to deflate prices or take back the water companies into public hands.
OFWAT in its current form, is pretty much 'toothless' as to what it feels it can do.

So water in itself, is seen as a price bearing commodity in which the shareholders must be kept happy. In my view, this hoodwinking by companies and politicians of the consumer to justify raising prices is unacceptable - I mean why should we pay taxes twice! We used to pay taxes for the upkeep of all the utility companies, as well as token amount of direct billing. So my question is why overall taxation has gone up rather than down after selling off the private companies in 1989, plus we are paying over inflation bill rises? Stealth is the name of the game and indeed we in the UK, with an abundant supply of water, raining as you wish - is short of water, not by way of the fault of the consumer, he paid and continues paying for services through the tax system, but politicians creating this situation where people are struggling for their basic needs.

Thanks for reading Mak

Summary: Public and private don't mix - politicians have their cake and eat it