UK: MORE REGULATOR RIPPLES COMING - WATER.

UK: MORE REGULATOR RIPPLES COMING - WATER. - We report how British water companies are making waves overseas (p86) but some turbulence is also expected at home this month. Regulators elsewhere have been giving the heads of privatised industry cause to ki

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Last Updated: 31 Aug 2010

We report how British water companies are making waves overseas (p86) but some turbulence is also expected at home this month. Regulators elsewhere have been giving the heads of privatised industry cause to kick their desks and now, it seems, it is the turn of Ian Byatt, head of OFWAT, to cause ripples in the comparatively placid existences of England's 10 water and sewerage companies.

In the first full industry price review since their flotation in 1989, Byatt seems set on pulling the plug on the profit formulas on which the companies were originally brought to market.

Pandelakis Athanasiou, a leading City analyst with UBS Phillips and Drew Limited, predicts that the new formula swishing round Byatt's mind for the next decade of the industry's existence could put a damper on profits by as much as 30%. He believes that the industry should take up arms against this threatening sea of potential troubles and openly oppose the OFWAT approach but as yet the industry's top management is showing what some think is a Hamlet-like lack of resolution in facing up to the regulator - perhaps insulated from care by increases in salaries since privatisation that are, typically, threefold.This could well be a temporary situation because, after all, they do have profit-related bonuses, and share-holders are likely to be pressing if, as Athanasiou predicts, the regulator's new formula is 'effectively a renationalisation of £9-billion worth of assets without recompense to the owners'.

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