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CONSULTATION PAPER ON THE LENGTH OF WATER PRICE LIMIT PERIODS

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Ofwat today publishes a consultation paper on whether the next price limits to be set in 2009 should cover five yea...
Ofwat today publishes a consultation paper on whether the next price limits to be set in 2009 should cover five years.

Ofwat currently sets annual price limits every five years for the 22 water companies and monitors their performance against them. These price limits allow an efficient company to run its business and meet external demands now and in the future, while keeping the increases to a minimum for customers. Before the completion of the last price review in 2004, Ofwat made a commitment to consult on the frequency of future price reviews.

In setting the length of the price review period, Ofwat wants to achieve a stable price structure for consumers, businesses and investors while encouraging water and sewerage companies to set their plans for the long-term.

The current five-year period has been shown to work reasonably well according to the independent Report into the Conduct of the 2004 Ofwat Periodic Review. This supported Ofwat's plans to consult further but warned that extending the cycle could increase uncertainty. Any change to a longer or shorter period than five years would require a licence change for each water company.

The Water Services Regulation Authority assumes responsibility for Ofwat's functions from 1 April 2006. It will consider responses to the consultation before reaching its decisions on future price reviews.

Note

1. The Director General of Water Services is the current economic regulator of the water and sewerage companies in England and Wales.

He exercises his powers in a way that he judges will allow them to carry out their functions properly, and finance them. His duties include protecting the interests of consumers, wherever appropriate by promoting effective competition. He will be succeeded by the Water Services Regulation Authority on 1 April 2006.

2. The consultation paper, 'Setting Water and Sewerage price limits:

Is five years right? will be available on the Ofwat website, www.ofwat.gov.uk, and from the Ofwat Library on 0121-625 1373.

3. A copy of the independent Report into the Conduct of the 2004 Ofwat Periodic Review (the Baker Report) can be found on the Ofwat website

4. Responses to the consultation can be sent by our preferred option of email addressed to: victoria.botcherby@ofwat.gsi.gov.uk.

Responses can also be sent via our online consultation form, which can be found on our website. If you prefer, you can post your response to: Victoria Botcherby, Office of Water Services, Centre City Tower, 7 Hill Street, Birmingham, B5 4UA. All responses should reach us by 4 May 2006.

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