Green policies blamed for jump in bills Power and water sectors warn of steep rises for homes and business may force industry to raise prices
David Gow Friday March 12, 2004 The Guardian British households and industry face hefty increases in their water and electricity bills in 2005, the likely date of the next election, to pay for the government's green policies, it emerged yesterday. Water and sewerage customers in England and Wales could be forced to pay more than the 30% extra in real terms over the five years from April 2005, originally foreseen by regulator Ofwat. It follows tough new environmental guidelines from ministers. Business bodies warned that industry could see their power bills rise by up to 30% - with a knock-on effect on domestic consumers - if the government sticks to its plans to enforce a 16.3% cut in greenhouse gases under an EU carbon emissions trading scheme that takes effect on January 1, 2005. After a serious cabinet row on electorally-sensitive price increases with Gordon Brown, environment secretary Margaret Beckett yesterday issued long-delayed guidance on environmental improvements in water quality. The guidance came six weeks late, prompting Ofwat to warn that it could bring delays to the tight timetable for the five-year price review. Companies have pointed to investor fears over the resultant uncertainty. The guidance, industry sources said, would increase the five-year investment ear-marked by water and sewerage companies above the £19.5bn originally planned -and far above the £15bn suggested to Ms Beckett by Philip Fletcher, Ofwat director-general, which would have cut the price increases to 25%. Both industry and Ofwat said it was too early to assess the impact on bills but Mr Fletcher said: "Given the cost pressures faced by the companies, customers in general should expect bill increases." Ms Beckett, accused earlier of being a captive of the "green lobby", said in her guidance: "It is already clear from representations from customers and companies and from the advice that I have received... that there is every prospect of significant real price increases in 2005 to 2010." But with average bills already set to rise from £234 this year to £306 in 2009, she added: "I am concerned about the effect of water bills, especially on those least able to pay. "Changes to our policies on drinking water and the environment cannot avert increases but, in a climate of rising water bills, I have closely scrutinised the need for and benefits of further policies to improve water companies' standards." The Environment Agency originally urged Ms Beckett to approve a £26.5bn, fall-back investment programme driven by new EU regulations on drinking and bathing water. Chairman Sir John Harman welcomed measures to stop pollution from storm sewerage overflows, protect wetland wildlife sites and control leaks but regretted the government's failure to adopt more rigorous environmental standards elsewhere. "These costs are being deferred, not avoided," he said. But he insisted that while bills would have to rise "to an extent" to reverse damage caused by the industry, this was also prompted by rising overheads and improved drinking water. Industry body Water UK said it was pleased that Ms Beckett had made capital spending on replacing and repairing ageing pipes and sewers her top priority. But ministers came under fire from both the CBI and EEF, the manufacturers' organisation, over their ambitious plans for CO2 trading which, the government says, should increase power bills by no more than 6%. Industrial and retail customers, who already face a combined £1.5bn bill over 10 years to rebuild the grid system and hefty increases to meet the switch to renewables, will pay considerably more - 10% to 30% - than government forecasts, the two bodies said. The EEF said UK power prices would surge faster than in Europe unless ministers persuaded other EU states to adopt its more stringent standards and urged a delay to the new scheme. "While the rest of Europe drags its heels, Britain's manufacturers are going to have to run much faster to meet the UK's ambitious target," said Martin Temple, EEF director-general.
