A correction mechanism for water pricing

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Sir, Your editorial “Ofwat should tighten the spigot on water profits” (October 21) is quite right. Customers should get a quicker share of windfall gains and, I would add, a better share of the financial efficiencies of the private equity companies that now dominate the industry.

Setting price limits five years ahead is not an easy task, as I well know, especially for a capital intensive industry in volatile capital markets. I now advocate a correction mechanism in the form of a price:dividend sliding scale, whereby dividends beyond those allowed for at price reviews could only be paid when accompanied by price reductions to customers. (Concentration on dividends would not affect companies reinvesting profits.)

Devising such a scale would involve analytic work and consultation with both financiers and customers. This could be done in advance of the 2019 review of price limits, aligning England with existing arrangements in Wales.

Sir Ian Byatt

Birmingham, UK

Director-General of Water Services

(Ofwat) 1989-2000

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