United Utilities to limit price rise next year

A glass being held at a running tap

Water company United Utilities has said it will scale back its proposed price increase for next year.

Prices in 2014-15 will now rise by no more than inflation measured by the Retail Prices Index. meaning an additional 1.2% rise has been dropped.

It said the move would cost £20m, which it is funding from a £75m tax rebate.

The company, which serves seven million people in north-west England, saw pre-tax profits increase £27m to £216m for the six months to the end of September.

In a statement, United Utilities said that it would keep customers' bills "in line with inflation next year", adding that customers would not pay "the full allowed price increase".

The company said that it had been repaid £75m from HMRC, after the resolution of an issue over corporation tax.

In addition to using £20m of the rebate to offset its previously planned 1.2% price rise, which industry regulator Ofwat had already permitted, United Utilities will use another £17m of that sum for customers "struggling to pay" their bills.

Increasing pressure

Ofwat has been increasing pressure on firms to limit price hikes in recent months.

Earlier in November, the water industry regulator blocked Thames Water's plan for an 8% price jump, saying that it was an "unjustified" amount for Britain's largest water company to charge customers.

Also this month, spending watchdog the National Audit Office (NAO) warned that consumers could face 17 more years of above-inflation increases in energy and water bills as they help pay for infrastructure renewal.

The NAO said that "gaps" in the official analysis meant government lacked "an overall picture of affordability".

'Cannot control inflation'

The comments came after five of the UK's six main energy companies announced price rises averaging 8.1%.

United Utilities chief executive Steve Mogford said in a statement: "We can't control inflation, but we can control the basic bill. We have listened to our customers. They have told us their household budgets are under pressure and keeping their water bill affordable is one crucial way we can help."

The company announced it would pay a dividend of 12.01p, an increase of 5% on the same six-month period in 2012.

Environment Secretary Owen Paterson has also written to water companies calling on them to recognise financial strains posed by increases in utility bills.

"Keeping water bills affordable is a crucial way we can help hard-working people," he said.

Severn Trent Water has already said it will not increase bills by above inflation next year.

The measure of inflation used by utility firms is the retail prices index (RPI), which fell from 3.2% in September to 2.6% in October.

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