Ruling expected over water charges
Water watchdog Ofwat is expected to push through with demands for lower household bills in its final decision on prices for the next five years.
The regulator shocked the industry in July when it called for a 4% cut in average bills - pressing water firms in England and Wales to reduce prices by an average £14 to £330 before inflation by 2015.
The demand contrasted with final business plans submitted to Ofwat in April, which instead pushed for average price increases of £31 before inflation.
The regulator has challenged the water companies' plans "vigorously" to demand greater efficiencies and also wants them to spend £21 billion on maintaining and improving the network. The companies have since had a chance to plead their own cases with the regulator but few industry or City commentators expect Ofwat to relax its stance significantly.
Richard Laikin, a director in financial services firm Ernst & Young's power and utilities team, said: "Our baseline assessment is that there will be only a limited improvement in the overall position in the final determination at the industry level."
While Ofwat is focusing on protecting consumers, some companies could appeal to the Competition Commission if they judge the settlement too harsh. The companies have argued that they should be allowed to make a fair return to encourage the outside funds they need to spend on the network.
If the usually safe industry is forced to cut dividend returns - or even raise cash through rights issues - investors could be scared away.
But unions have meanwhile lashed out at the "very substantial" job losses looming among water firms as they face up to a tougher pricing line from Ofwat.
GMB national officer Mick Rix said: "Even before Ofwat's final determinations, some water companies had announced their intention to cut jobs and outsource activities in order to protect their profits, and we now expect other water companies to try and follow suit."
