Thames Water today posted a giant 31 per cent leap in profits as it was revealed that Britain’s largest water supplier has missed statutory targets for reducing leaks for the fourth consecutive year.
The company, which provides water to eight million people across London and the Thames Valley, is losing 894 million litres every day - 34 million litres above the guidelines and enough to fill 350 Olympic-sized swimming pools.
Ofwat, the industry regulator, said that the German-owned company’s failure to maintain and replace ageing Victorian pipes had contributed directly to water shortages which have, according to the Environment Agency, left the South East with less water per person than parts of Sudan.
The watchdog has demanded that the Reading-based firm dips into its £346.5 million pre-tax profits to spend “as much money as is necessary to remedy its leakage failure.”
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Under new powers never before implemented, Ofwat can impose a fine of up to 10 per cent of turnover - up 18 per cent to £1.39 billion last year - if the company fails to comply.
In a highly critical statement, the regulator said that an increase of 24 per cent in the average household bill between 2005 and 2010 was not being matched by improvements.
A spokesman said: “This is unacceptable. The company’s poor leakage performance is not only inefficient, it is also contributing to water shortages that have led Thames Water to impose a hosepipe ban and seek a drought order.”
Thames Water blamed below-average rainfall in all but two months between November 2004 and March this year when it imposed a hosepipe ban in April.
According to company figures, it spends £500,000 a day on replacing and fixing thousands of miles of pipes - some 150 years old - and has cut leakage by 21 million litres a day over the past year.
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Thames’s profit surge has been replicated across the industry with companies reporting unprecedented profits after five comparatively lean years.
In its 2005-2010 price review, Ofwat - which sets a cap on the amount each regional water company can charge - allowed the suppliers to raise prices by up to 4.2 per cent a year above inflation. By 2010, the average household bill will have risen by 24 per cent to around £300.
Last month, Severn Trent announced an 18 per cent rise in annual profits to £270 million. Pennon, in the south-west, enjoyed a 25 per cent profit boost to £111m.
United Utilities, in the north-west, reported a 21 per cent increase to £481m. And AWG, the parent company of Anglian Water, reported a trebling in full-year profits to £109m.
Jeremy Pelczer, Chief Executive Officer of Thames Water, said: “Given our strenuous efforts to reduce leakage, it’s immensely frustrating to have missed our London target, but we are determined that our biggest-ever capital investment programme will enable us to meet our leakage target over the full five-year regulatory period.”
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Roger Evans, London Assembly Conservative spokesman for the environment, said: “These figures defy belief. Ken Livingstone implores residents to conserve water, when in actual fact he should be castigating the water companies for failing to contain the obscene amount of water that is leaking away.”
The London Mayor deflected the criticism, adding that the scale of Thames Water’s leaks undermined its controversial bid to build a desalination plant in Beckton.
He said: “It is astonishing that Thames Water has failed to meet its targets for dealing with leaks whilst claiming that it needs to build an expensive, energy-guzzling and environmentally damaging desalination plant to supply water.”
But the Mayor added a cautionary note: “As we push Thames Water to put its house in order we must all do our bit to conserve this precious resource.”
Dame Yve Buckland, Chair of the Consumer Council for Water, said: “Today’s announcement by Thames Water rubs salt in the wounds of consumers, damaging the goodwill and consumer confidence it will need if it is to impose water restrictions through a drought order.”