Miscalculations by regulator Ofwat have led to windfall gains for water companies and customers paying over the odds on water bills, the Public Accounts Committee has found.
That is because Ofwat has consistently over-estimated water companies’ financing and tax costs when setting price limits, according to the Committee. It estimates those errors have handed water companies some £1.2bn over the last five years.
While Ofwat has attempted to ensure those gains were shared with customers, the Committee said results were mixed at best.
The watchdog urged Ofwat to review its approach to setting allowances for the cost of debt and corporation tax, and report publicly on what actions it intends to take to improve its performance.
It also calls on the regulator to use comparisons with other sectors and international suppliers to develop a clearer picture of what services should cost if provided efficiently.
Read the full report here.