The regulated UK market

In late 2009 OFWAT, the UK regulator, published a final determination for water prices for the next period.  On average, OFWAT decided that the water companies must keep customer bills flat while embarking on massive capital investment plans.  That produced the usual chest-beating from the regulated utilities who promised that the end of civilisation was at hand.  The Daily Telegraph, for example, reported in mid-January that “United Utilities is expected to embark on a’"major’ cost-cutting drive that could see it shed 10pc-20pc of its workforce, as it prepares this week to accept harsh restrictions on pricing set by the regulator.”

A longer story in the Financial Times later that month reported Professor Martin Cave, an expert in utility regulation at Warwick University, saying the he suspects that the industry has been “crying wolf”.  “It’s difficult to reconcile the cries of outrage with the fact that they’ve accepted the judgment,” Prof Cave said.

In the preceding five years bills had been allowed to rise more quickly than inflation. Profits were higher than expected as the companies were able to borrow at lower rates than had been assumed by OFWAT. Many investors, the FT suggested, had grown used to equity-like returns for risk levels more akin to fixed income securities.

Then, at the beginning of February, the price of shares in Northumbrian Water soared when it was believed that a Canadian-based Teachers’ Pension Fund was buying the shares – possibly even mounting a takeover.  Then on February 18 the Fund announced it was ruling out any such plans.  The stock price fell back.

Higher water bills

The North Carolina Charlotte-Mecklenburg Utilities said faulty electronic transmitters could be causing some unusually high water bills, but the department believes the vast majority of bill spikes are due to people using more water than they realize.  Faced with an increase in customer complaints about high bills, the Charlotte City Council asked Monday night whether the water billing software is billing correctly, and what they should tell constituents.

Last fall, residents of the Peninsula neighborhood in Cornelius complained of unusually high bills produced by the water billing software -- in some cases, more than $500 a month -- or abnormal spikes. Media coverage spurred more complaints citywide, and CMUD said it's struggling to investigate all of them.  Denise Foreman of CMUD said the department believes most spikes were due either to leaks or to people using more water than they realized. Another factor: CMUD raised rates in 2008, with the biggest increases being levied on the heaviest users.  But Foreman also said CMUD has investigated some complaints and has been unable to find a cause.  "One-time spikes can be a huge question," Foreman said. "We'd like to know why."

Bob Watson of Cornelius said the water bill at his business, a self-storage facility, jumped one month from the usual $30 or $40 bill to more than $500. "Something fishy is going on here," said Watson, who's part of a group trying to investigate the bills.  Council member Edwin Peacock, a Republican elected citywide, said he has received calls from residents who have years of water bills showing consistent usage -- then a one-time spike. After that, bills return to normal.  "How do we respond? How many people are we dealing with?" Peacock said.

Foreman said CMUD is confident its meters are accurate. She said they are mechanical devices, and the technology hasn't changed in 40 years.  A relatively new factor is that electronic transmitters now send meter readings to billing. Those were first installed in 2002, and Foreman said they can malfunction if moisture corrodes electronics or batteries wear down. The transmitters save the department about $1.6 million annually.  "We feel like we can trust our meters," Foreman said. "You can't program the meter electronically. They are mechanical devices. But the transmitters can mess up."

Saving water and electricity costs

Here are a couple of tips for water and electricity usage savings for 2010:

Replace your existing showerhead with a new low-flow showerhead. The water-efficient showerhead, coupled with only a 10-minute shower, will save 5 gallons of water over a typical bath and up to $145 each year on electricity used to heat the water.

To save hot water and the $24 to $40 in fuel to heat that water each year, wash your clothes in cold water. Choose a laundry detergent that's formulated for use in cold temperatures.