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The UK’s water regulator is to face scrutiny from the competition watchdog after setting the water industry’s strictest price controls.
Yorkshire Water became the first large water company to challenge Ofwat’s industry price review, which sets out how much water companies can invest and charge customers over the next five years.
In December, the regulator ordered water companies in England and Wales to cut bills for customers by £50 over five years, while spending £51bn on improving services and investment in infrastructure.
Ofwat also told the companies to cut the amount of water lost to leaks by 16%, which it said would save enough water to meet the needs of everyone in Birmingham, Bristol, Cardiff, Leeds, Liverpool and Sheffield.
The regulator’s crackdown on the sector followed an outcry over the industry’s lucrative shareholder payouts, questionable tax arrangements and poor record on preventing pollution and tackling leaks.
Yorkshire Water’s appeal means Ofwat’s decision will be referred to the Competition and Markets Authority (CMA), which will decide whether the price controls are fair.
Thames Water and Northumbrian Water are also understood to be considering whether to challenge Ofwat’s price review before the deadline for appeals on 15 February, which would put the regulator firmly on a collision course with the industry.
Ofwat’s latest round of financial controls are considered the toughest presented to the water industry because it calls on the companies to make major investments while keeping bills low.
Yorkshire Water said it will not accept Ofwat’s decision because it would force the company to sacrifice critical long-term investments in favour of meeting short-term targets.
Liz Barber, Yorkshire Water’s chief executive, said: “We’re naturally committed to being the most efficient company we can but have decided that accepting this determination would jeopardise Yorkshire’s resilience and our own.
“Everyone at Yorkshire Water shares a common purpose to provide safe and reliable services to our customers and our county, long into the future,” she said.
An Ofwat spokeswoman said the regulator had challenged all water companiesby putting forward the greenest price review ever to help deliver improvements to customer services and lower bills.
She added: “We are ready to fully engage with CMA process, setting out our analysis and why we are confident this is the right settlement for customers, the environment, and the company.”
Thames Water’s board is expected to discuss whether to lodge its own appeal at a special meeting later this week. The argument is understood to be finely balanced between board members. Northumbrian Water is also expected to make a decision before the end of the week.
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