The firm which owns South West Water has seen profits rise by more than a quarter in the past six months, but water prices in Devon and Cornwall remain the highest in the UK and that’s not likely to change any time soon.
Despite claiming that water bills have dropped since 2009, South West Water consumers paid an average of £495 in 2015/16 and £497 in 2016/17 – the most expensive water prices in Great Britain.
Now it has been revealed that Pennon Group’s half-year results for the six months to September 30, 2017 were £112.3million, which is up 26% on the £89.1m made in the first half of 2016/17.
The firm’s annual report also revealed that underlying revenue jumped 5.6% to £723.9m from £685.5m.
The company put the higher water revenues down to “customer demand”.
The British company, which is based in Exeter, stressed it is working hard to stifle prices, though it does charge the highest bills in the UK.
In 2015/16, South West Water consumers paid £495 a year compared with £363 in Yorkshire or £369 in the Thames Valley area, two other strong tourism regions.
Last year prices had increased across the board, but again South West Water consumers have paid more than anyone else with prices of £497 compared with £366 in Yorkshire and £372 in greater London.
South West Water has pledged to keep household bill rises below inflation to the end of the decade.
Inside South West Water’s Mayflower Treatment Works in Plymouth, which is scheduled to become operational in September 2018 (Image: Penny Cross)
The average bill for water and wastewater services in 2017/18 will be £491, a fall of 1% on 2016/17.
This follows a price freeze and a series of bill reductions and below inflationary rises in recent years.
South West Water is the only water and sewerage company to reduce its average bill in 2017/18.
But prices remain the highest nonetheless, which South West Water defended its price structure saying its customers are continuing to pay for the “massive investment that was required to redress decades of neglect and under-investment before privatisation in 1989”.
The firm said the population in Cornwall and Devon tended to be more thinly spread than in large urban centres meaning it is more costly to carry out infrastructure work.
A spokeswoman for the company admitted there was some perceived unfairness in that 3% of the country’s population had been supporting the clean-up of 30% of the nation’s bathing waters.
Sunny Towan Beach
She said: “Before South West Water was established, raw sewage from almost 40% of the region’s homes was routinely discharged directly into the sea.
“This no longer happens, thanks to South West Water’s £2.3billion Clean Sweep programme, the biggest environmental clean-up of its kind in Europe.
“The £50 Government Contribution towards household customer bills, introduced in 2013, specifically addresses the underlying ‘unfairness’ of three per cent of the country’s population supporting the clean-up of 30% of the nation’s bathing waters.”
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She added: “In addition, the relatively small number of people that live in the South West are spread across a very wide area with few major urban centres. The result is higher than average infrastructure costs and a lower than average number of customers to share the costs.
“To put this into context, Thames Water has one sewage treatment works serving three million customers in East London while we maintain more than 650 across four counties and along two long coastlines serving 1.7 million people.”
Chris Loughlin, chief executive of South West Water
Chris Loughlin, Pennon group’s chief executive, added: “In water, our focus on cost savings means bills are lower now than they were eight years ago, whilst at the same time we are continuing to invest significantly in our plants and distribution network.
“This means we have delivered significant improvements in clean water and bathing water quality and our leakage levels have halved since privatisation.”
However, not-for-profit journalists at Corporate Watch recently revealed that more money generated from South West Water bills ended up with shareholders and banks than got spent maintaining and building pipes, reservoirs and treatment works.
Pennon said its half year profits for 2017/18 were also boosted by final integration of Bournemouth Water, which delivered £12m in synergies in 18 months, with a total of £27m expected to 2020.
(Image: Getty Images)
The firm said water prices would fall by 1% over the next 12 months which it insisted made it the only utility company to drop its price – yet they remain the highest of all.
The spokeswoman added: “Tourism brings millions of visitors and billions of pounds into the regional economy. Thanks to Clean Sweep, we now have some of the best beaches and cleanest bathing waters in Europe – in 2016, all 80 (100%) of Cornwall’s beaches met tough new standards.”
Water services are expected to open up to competition in the next few years. Competition was recently introduced for non-household customers although as things stand no decision has been taken to introduce competition to household customers.
However, South West Water said that a 2016 Ofwat report suggested that if household competition came into force, reductions in customer bills would likely be small, especially in the short term.
The spokeswoman said: “If household competition is introduced, licensed retailers would buy wholesale water services – the physical supply of water and the removal of wastewater – from regional water companies, including South West Water, who would continue to supply water, treat wastewater and maintain the water and wastewater pipe networks.
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“Direct services supplied by the retailer would include billing and payments, meter reading, customer service and water saving advice. These ‘retail’ services currently account for approximately 5% of the average household bill.
“The wholesale costs of treating, distributing and collecting used water would not be affected by competition. South West Water will continue to invest for the future and do what’s right for customers.”
Source: Cornwall Live