The water industry regulator Ofwat sharply criticised Thames Water after the company again failed to meet its target for cutting the amount of water lost through leaks. The news came as the company reported profits had increased by almost a third.
Ofwat said Thames's performance in cutting leaks was "unacceptable" and was exacerbating problems of water shortage. Thames has already imposed a hose pipe ban on its domestic customers, who are facing significantly higher bills, and is applying for a drought order, which would allow it to bring in more swingeing restrictions on water use.
In a statement, Ofwat noted that Thames had missed its leakage target the previous year and added: "Given its current leakage performance, we are concerned that the company may not meet future leakage targets or its security of supply commitments.
"Customers are paying the higher prices Thames Water has been allowed to charge - an average increase of 24% over 2005-10, excluding inflation - without getting all the benefits that the company has promised to deliver. This is unacceptable," it said.
Thames said that it lost 894m litres of water a day to leakage last year against a target of 860m litres. It said that it beat its leakage targets for the Thames Valley but London remained the problem area.
"No one is more disappointed than us to have missed the overall target. We are working flat out to reduce leakage as fast as we can," a spokesman said.
Thames Water said it was adopting a twin-track approach to the problems of leaks. In addition to finding and fixing leaks, it is also spending heavily on replacing up to 1,000 miles of London's oldest water mains by the end of the decade. "We are investing ÃÂ£500,000 a day; ÃÂ£1bn over five years," it said.
As well as its stock of old mains, Thames argues that the clay soil on which London is built is sensitive to temperature changes causing movement, which puts stress on the mains and causes leaks. It also argues that it has to take account of the traffic problems caused in London when it does dig up the roads. "We can't overlook the need not to cause gridlock. Replacing the mains is expensive, slow and not particularly popular but it is absolutely essential," it said.
The company insists that though it missed its leakage target for London it did cut the amount of water lost from just over 804m litres a day in 2004-05 to 783.6m litres. "We are determined to reduce leakage further."
News that Thames had again missed its leakage reduction target came alongside results from the company, part of the German utility RWE, which showed pre-tax profits rose from ÃÂ£263.7m to ÃÂ£346.5m.
"In the face of a challenging year for Thames Water and the whole water sector, we are pleased to deliver a good set of results," the chief executive, Jeremy Pelczer, said. He said the company was determined to meet its leakage reduction targets over the five-year regulatory period, which runs between 2005 and 2010.
RWE has indicated it wants to sell Thames Water but the company insists that the ownership question will not affect its investment in its plans to cut leaks.
- 183 Environment