Industry regulator Ofwat has said revisions to price limits of water bills would not apply to customers' bills before April 2014, after Thames Water proposed to add an one-off fee of £29 per households. Ofwat chief executive Regina Finn said:
We know that household incomes are becoming ever more stretched - nobody wants to see any unnecessary increase in bills.
We will challenge these proposals and question the company strongly on their reasons. Proposed increases will only be allowed if they are fully justified.
Plans for Thames Water to charge their customers a one-off surcharge of approximately £29 have been greeted with anger on social media site Twitter.
Surely risk of Thames Water's "unforeseen circumstances" belongs to its shareholders, not its customers? Cut dividends, don't hike bills!
Let's be clear, Thames Water. I pay my bill. others don't, so I have to pay again. And if I refuse to pay I am cut off. OK, perfectly fair.
Thames Water have applied to water regulator Ofwat to charge customers a one-off surcharge on top of their bill of £29 pounds. The company said they have been forced to deal with "unquantifiable" costs that they were not aware of when Ofwat set price limits back in 2009. Increased costs include:
- Increases in bad debt as a result of the economic downturn
- Increases to Environment Agency charges
- The costs of operating and maintaining the additional 40,000 km of sewers that were transferred to Thames Water by the government in October 2011
- Costs of land acquisition and other preparatory work required for the construction of the Thames Tideway Tunnel
Thames Water has written to Ofwat, the industry regulator, to ask permission to charge customers an addition one-off fee of about £29 per household.
The money is to cover the costs they have spent on acquiring new land for the construction of the Thames Tideway Tunnel. In a statement, Thames Water said:
"Thames Water has submitted an application to Ofwat, its industry regulator, for an interim adjustment to prices for the current price control period, which runs from April 2010 to March 2015.
"The biggest item of expenditure involved is £273m spent on acquiring land required for the construction of the Thames Tideway Tunnel.
"If approved by Ofwat, the net impact would result in a single, one-off additional cost of about £29 per household in 2014/15, equivalent to nearly £6 per year over the five-year period. "
The operations director of the UK's biggest water company - which was revealed to have paid no corporation tax this financial year - has been made an OBE in the Queen's Birthday Honours.
Robert Collington, one of eight directors on Thames Water's executive team, has been given the award for "services to consumers" in London and the Thames Valley area, "particularly during drought".
The firm's website says that Mr Collington, known as Bob, was appointed to the position of operations director last September and is responsible for 2,300 employees involved in their operations and maintenance.
Last summer, Thames Water kept a hosepipe ban in place for two months despite record levels of rain falling in that period after the restrictions were enforced.
They were one of seven water companies across southern and eastern England to bring in the bans after two unusually dry winters left some groundwater supplies and rivers as low as in the drought year of 1976.
Thames Water says its taxable profits are reduced by allowances on its £1 billion-a-year investment programme. Remaining gains are offset by tax losses claimed from other members of the group.
The UK's biggest water company has admitted it paid no corporation tax for the last three years.
Thames Water, who saw revenues of nearly £2 billion and above inflation price rises, said they were not performing a "tax dodge" but were following the government's rules.
ITV News Business Editor Laura Kuenssberg, has been hearing how they do it.
Writing in The Daily Telegraph, Ofwat Chairman Jonson Cox, has voiced his concern over water profits and taxation.
He said: "It has also been alleged that some companies use shareholder loans to avoid UK taxation.
"At the same time, hard-pressed customers have seen annual bills rise by 13.5pc since 2010-11, while their incomes have fallen.
"I agree that the dichotomy between profits and the prices charged to customers raises business, regulatory and moral questions."
A spokesman for Thames Water said: " We have not paid much corporation tax in recent years because the Government's tax system allows us to delay, not avoid, payment of tax based on how much we invest".
"Because we are investing £1 billion a year from 2010 to 2015, more than any water firm in the UK's history, we are able to defer a lot of tax payments to future years".
"The HMRC tax mechanism is called the capital allowance. Its aim is to encourage firms like us to carry out early and extensive infrastructure investment".
"If capital allowances did not exist it would mean one of two things: customers' bills would be higher, or Thames Water would invest less. As things stand we invest record amounts while our customers' bills remain the second-lowest in the sector, at less than #1 a day."