Photo source: Hammersmith and Fulham Borough Council Lord Selbourne and Councillors at Commission launch
An independent commission is to study the case for the massive Thames Tunnel. The tunnel is Thames Water’s preferred solution to reduce sewer discharges into the Thames and avoid EU fines. But it is hitting increasing opposition from local residents, councils and MPs.
The commission will be led by Lord Selbourne. He said: ”The key question is whether this multi – billion pound scheme is the best solution for making the Thames cleaner or whether there are sensible alternatives that are cheaper, greener and less disruptive”. Thames Water’s Chief Executive, Martin Baggs, recently revealed that the sewer’s initial £3.6 billion price tag - initially costing customers £65 per year for life – was based on 2008 figures and ‘will inevitably increase’.
The concern has to be that the Water Companies have a strong incentive to favour capital intensive rather than operating cost schemes. One of the reasons for this is that any new capital expenditure increases the Regulated Capital Value of the business and therefore increases returns to shareholders. This is one of the main reasons why investors like Mcquarie bank are able to achieve returns of nearly 12% for their shareholders. Ofwat is looking at the capital cost, operating cost balance and in the view of this blog needs to take action to redress the balance.
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