Kelda fears water bill interference

Kelda, the parent company of Yorkshire Water, yesterday delivered a warning to the Government not to interfere in the setting of water bills in the run-up to an expected general election next year.

Kelda, the parent company of Yorkshire Water, yesterday delivered a warning to the Government not to interfere in the setting of water bills in the run-up to an expected general election next year.

Water companies are pushing for an average increase in domestic charges of 30 per cent over the next five years to pay for a £21bn programme of investment in environmental improvements. Kelda has proposed a 22 per cent increase in bills between 2005 and 2010 to fund its £1.7bn spending plan.

The increase in bills will kick in next April - the most likely date for the country to go to the polls - and will coincide with rises in electricity bills. The industry regulator Ofwat will announce draft price increases this August and final proposals in December.

Water suppliers are fearful that the Government will insist on the environmental programme going ahead as planned but expect industry to shoulder more of the cost without passing on the full amount to customers.

John Napier, the Kelda chairman, said the need for water suppliers to have sound and sustainable capital structures which kept borrowing costs to a minimum was understood by the Government, the regulator, the industry and capital providers. "It is not expected, and would be a major disappointment and damaging to the prospects of the industry if a more arbitrary price approach were now to be applied," he added.

Mr Napier was speaking as Kelda reported a 9 per cent rise in pre-tax profits before exceptional items to £191.6m last year. The core Yorkshire Water business increased operating profits by 8 per cent to £252m, helped by a 12 per cent cut in costs.

But Kelda's US water business, Aquarion, disappointed for the second year in a row. It was held back by the unusually heavy rainfall in the north-east of the US last summer which meant householders in the area needed to water their lawns less. The weakness of the dollar also knocked £3m off US profits on translation back into sterling.

Mr Napier said Kelda was seeking to "accelerate the management, operational and cultural integration" of its US business. The chief executive, Kevin Whiteman, maintained that Kelda was pleased with Aquarion and expected to benefit this year from a review of the rates it is allowed to charge.