Water companies made windfall gains of at least £800 million between 2010 and 2015.
That’s according to a new report by the National Audit Office (NAO) which stated firms earned £410 million from lower than expected corporation tax rates and £840 million from lower than expected interest rates.
It added they absorbed costs and provided water bill discounts worth up to £435 million during the same period, leaving them with around £800 million.
However, customers’ bills did not fallen because Ofwat didn’t “balanced the risks” between water companies and consumers, NAO stated.
Ofwat said it is “surprised” by the suggestion its price control regime “does not yet achieve value for money, particularly given the evidence of strong delivery throughout the report”.
Cathryn Ross, Ofwat Chief Executive added: “The report itself states that the Consumer Council for Water found that the majority of customers are satisfied with the value for money of water services with an increase from 69% in 2009 to 75% in 2014. ”
“The report is right to say that companies made significant unexpected gains during the 2010 – 2015 period. This is not new information… The gains were largely as a result of unexpectedly low borrowing costs following the severe global financial crash, high inflation and changes in tax rates during the 2010 to 2012 period.”
Water UK, which represents the industry, said: “The NAO has been looking at the fifth regulatory periodic review, conducted by Ofwat in 2009, for the period 2010 to 2015 which saw some turbulent economic conditions and volatile financial markets. We have since moved on significantly with the sixth periodic review having been conducted in 2014, when Ofwat took the results of previous predictions into account in making their determinations for the 2015-2020 period.”
It added the report contains “no real surprises overall”.