Pennon’s profits gush is set to be staunched

Profits at South West Water are overflowing, indicating why regulator Ofwat is set to slap one of the biggest price cuts on Britain's most expensive water company.

Pennon, owner of South West Water, today revealed profits from selling water rose 13% to £69 million in the six months to the end of September.

Pennon may be making hay while the regulatory sun continues to shine.

Ofwat will next week unveil its price caps on Britain's local water companies for the next five years.

At £488 a year on average, West Country consumers already have the highest bills. South West Water wanted to put them up to £517 a year by 2015.

However, in an initial ruling Ofwat has already signalled it wants the company to cut prices by £30 a year ,or 6%, to £458, which even then will leave South West Water with the highest bills in the land.

Thames Water bills are expected to remain flat at around £304 a year until 2015 even though the company had told Ofwat it wants to raise prices by more than £50 over five years.

With profits up 14% at its Viridor landfill business Pennon's half-year profits are £11 million better at £94 million. Its shareholders are celebrating an inflation-busting 3% rise in the interim dividend to 6.95p.