Why do water rates vary so much across the country? Vary hugely more than Oil / gas

PollySouthend

Does anyone know the official justification to why water rates vary so much across the country?

The exact same house, with the exact same usage on a meter can be two to three times the price depending on the location.

Oil and gas has to come hundreds / thousands of miles away and vary s by a small percentage across the country.

Is it just that they have a monopoly?

macman

Well, since they each have a monopoly, how come they vary by so much? Monopoly doesn't really come into it, since the revenue stream is strictly controlled by OFWAT.
Collection and distribution costs vary enormously from area to area. For example, SWW have the highest rates in the country because the supply and disposal network in a relatively lightly populated and large region has to cater for the huge increase in population during the summer months: i.e. to support the crucial tourist industry. SWW has also had to spend 20 years updating an antiquated sewage network where until the 80's, most of the waste from coastal towns was simply mechanically processed and pumped straight into the sea. EU legislation has put an end to that.
Prior to privatisation, most municipally run water authorities had done little major upgrading for decades, because of the lack of finance available.
Most of the cost of oil/gas is in the extraction, refining-and tax.

PollySouthend

So in the south west they can't dump waste into the sea anymore and have spent 20 years building processing. Is that now complete? Once it's complete will water rates go down there? Surely if anything the amount of people over the last 20 years holidaying in cornwall has decreased with the rise of budget airlines? Also more and more homes in cornwall over the last 10 years are just 2nd homes so that would also reduce the demands on water and waste?

Ofwat don't seam any more capable than ofgem. Water companies do have a monopoly as you have no choice, most people can not dispose of their own waste or have the space to collect their own water.

Cardew

How does less people holidaying in Cornwall(even if it were true) affect SW Water's remit to obey the EU directives for sewerage disposal.

In simplistic terms if the permanent population of Devon and Cornwall was, say, 1 million and swelled to, say, 3 million in summer, then they have to have facilities to supply, maintain and treat water/sewerage for that 3 million.

It is much like electricity generation in UK. The peak load on the Grid is on a winter evening. At that time Solar generation will be producing nothing and the wind might not be blowing for the 'big windmills' to produce any electricity. So the UK still need to have 'conventional generating' capacity to cope with that maximum demand.

Ofwat do have a lot more powers than ofgem and have shown they are willing to use their teeth on occasion. They set targets for all the companies, strictly control the revenue the companies can raise and set a ceiling on their profits.

The problem was caused by Maggie when she 'sold off the family silver' and left the various companies with hugely varying costs and a hugely varying customer base to fund those costs.

Now this Government have sold off more family silver in the shape of Royal Mail, how long will it be before postage costs reflect the true cost of delivery? I read that every letter sent from, and to, the Hebrides cost Royal Mail over £5.

macman

PollySouthend wrote: »

So in the south west they can't dump waste into the sea anymore and have spent 20 years building processing. Is that now complete? Once it's complete will water rates go down there? Surely if anything the amount of people over the last 20 years holidaying in cornwall has decreased with the rise of budget airlines? Also more and more homes in cornwall over the last 10 years are just 2nd homes so that would also reduce the demands on water and waste?

Ofwat don't seam any more capable than ofgem. Water companies do have a monopoly as you have no choice, most people can not dispose of their own waste or have the space to collect their own water.

No, because SWW will probably have borrowed over a much longer period than 20 years to make the capital investment required.
The basic geography of an area like the south-west (long coastline, hilly terrain, dispersed population, only 2 major towns, lots of coastal resorts), always means that the cost of collection, distribution and disposal there will be higher than in dense urban regions.
It is likely that in the long term the differential between SWW rates and elsewhere may be reduced though.