United Utilities faces £8.5m fine

United Utilities has been threatened by water industry regulator Ofwat with an £8.5 million fine for uncompetitive trading.

The penalty is the first of its kind and could be imposed after the North West utility was repeatedly warned over its failure to test the services it provides from its own subsidiary companies against the wider market.

The fine covers the utility's deals with its associate companies, including installing and maintaining water meters without testing its prices in the wider market.

United Utilities pre-tax profits were up 21 per cent at £481 million for the year to March 31, 2006. The fine is being based on £95 million in trading between the utility and its own companies in the 18 months to March this year.

Under powers which came into force two years ago, Ofwat can fine water companies up to 10 per cent of their turnover, although the £8.5 million penalty represents 0.7 per cent of the company's £1.2 billion regulated turnover for 2005/06.

Philip Fletcher, Ofwat's chairman, said: "We take these breaches very seriously. The company has continued to trade with associations in a way that if left unchecked has the potential to harm customers' interests."

Last December, United Utilities gave Ofwat a legally binding undertaking to change its practices by the end of April 2007 to ensure that it complied with its licence.

United Utilities said: "Significant progress has already been made under the new management team in addressing Ofwat's concerns by competitively tendering relevant services."

Customers of United Utilities had their bills lowered in 1999 and 2004 after Ofwat intervened when United Utilities was found to be in breach of its licence over trading with associate companies.

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