The periodic review takes time. The regulator began the current review way back in the autumn of 1996 and soon made his expectations clear. The evidence of 1994-96 was that companies could make much greater efficiency savings than had been previously assumed. And a rebalancing between companies and customers was necessary, by means of a large, immediate price reduction in 2000. Since then the key public debate has been about how much money should be spent on health and environmental improvements.
Water scarcity is, additionally, a real problem in some areas.
Byatt has always held that health and environmental improvement are political matters and that it is for ministers, not him, to say how much is necessary. So he has always tried to bring this part of the equation under public scrutiny, as the dispensable element by which prices can be reduced. First, the cost of capital. Byatt has become increasingly tough about the rate of return he will assume in making his decision, given the low-risk nature of the water business. He has proposed something in the range of 4 per cent to 5.5 per cent and, despite howls from the companies, seems likely to stick to this.