Thames Water Bids for Higher Rates

The company opened its Beckton desalination plant in 2010 but says the increase is needed for other reasons: the cost of the Thames Tideway Tunnel and too many unpaid water bills.

London politicians and newspapers are up in arms that Thames Water has submitted an application to Ofwat, its industry regulator, seeking approval to charge higher rates to its customers. The company already has an operational desalination plant in place at Beckton, but that facility is expected to be used during drought conditions; company officials said higher fees are needed because of the cost to acquire land for the Thames Tideway Tunnel and also because the number of customers not paying their bills has risen.

When installed, the Beckton desalination facility was the world's first four-stage reverse osmosis system, according to Thames Water. The plant is highly efficient and is powered by electricity produced from biofuels. It will collect water for treatment from the River Thames only at high tide, when it is least salty.

The higher prices the agency seeks would be in place until March 2015 if approved, and company officials say their average bills still would be among the lowest in the country.

"Ofwat resets price limits for each water company every five years, most recently in 2009, based on the best information available at the time," said Stuart Siddall, chief financial officer for Thames Water. "Then, during the five year period, almost all changes to costs and revenues, whether upwards or downwards, are up to us to manage. These include the costs of dealing with severe weather, changes to financing, employment, energy and chemical costs, business rates, and tax. However, at the beginning of a five-year period there are always a small number of potentially significant costs and revenues that can be clearly identified but not quantified. These are set out at the time of the price review, and either the company or Ofwat can seek an adjustment, upwards or downwards, once the actual costs and revenues are known. That is what we are doing now."

The Thames Tideway Tunnel is a major new sewer that will help tackle the problem of overflows from London’s sewers and will protect the river from increasing pollution for at least the next 100 years, according to the company.

Siddall told the Daily Telegraph that unpaid bills have risen by 50 percent: "Before the recession bad debts were running at £40 million a year, but now they are up at £65 million. One in 25 bills are not being paid."

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