Yesterday we reported that, according to the BBC, United Utilities (UU) have submitted plans to raise their prices by 2.7% per year above inflation for the next five years, or 11% above inflation in total.
Further investigation reveals that the five-year headline increase has been "massaged". What UU actually stated was that even though their average increase is 2.7% per year, "bills are tipped to rise by 2.1% on average thanks to greater use of water meters." That's where the '11% over 5 years' came from.
Closer examination shows the proposed rises are front-loaded in order to increase UU's income in the early years. The proposed increases above inflation are: 2010/11 – 4.2% 2011/12 – 4.4% 2012/13 – 3.1% 2013/14 – 1.3% 2014/15 – 0.7%. In total, this amounts to a massive 14.4% above inflation with most of the rise (8.8%) in the next two years. If we assume, optimistically, that inflation averages 3% per year over the same period, this means that our water charges will increase by over 32%.
An investigation of UU's preliminary results for 2007/08 shows that dividends paid out to shareholders amounted to £411.2 million. Up to and including this year, UU's target has been to increase dividend per share by the rate of inflation. However, for 2009/10, the target is being changed so that the dividend per share is increased by RPI plus 2%. This shows where some of the proposed increases for water charges will be going.
Perhaps the proposed increase in water charges is something that Stephen O'Brien, our MP should be looking into?
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