Water companies tell Ofwat: 'We need to spend more on sewers'

Water and sewage companies will urge regulator Ofwat to let them spend more money on expanding the UK's sewers so they are better able to cope with floods.

A research note published by Merrill Lynch last week said that water companies could end up benefiting from resulting increases in investment.

Ofwat fixes the prices that companies can charge customers based as a percentage of "regulatory asset value" (RAV), or the worth of their network. If companies spend more on their assets, the value rises - as does their return allowed by the watchdog.

In December, for the first time, water companies will submit their "strategic direction statements" to Ofwat, which will set out their spending priorities for the next 25 years. The need to invest more in the country's largely Victorian sewers will be at the top of the list. Many sewers flooded last month because they could not cope with the amount of rainfall, posing a public health risk.

In late 2004, Ofwat said companies should spend just over [pound]4bn on their sewers from 2005 to 2010. It added that a similar amount should be invested from 2010 to 2020, but this figure is now likely to have to be revised upwards.

A spokesman for trade association Water UK said: "As more demand has been put on drains and not very much over the decades has been done to improve sewers' capacity, flooding is happening more frequently as a result."

Companies want to be allowed to build more "interceptor sewers" - such as the [pound]2bn Thames Tideway, which was recently approved - to act as overflow tunnels when existing sewers flood.

Separately, the Government launched a consultation at the end of last month, on the transfer of the estimated 200,000 kilometres of private sewers, mostly owned by households, to water companies. Merrill Lynch estimated that the increased cost of maintaining them could raise household bills by up to [pound]11 per year, or 3 per cent.

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