Anglian had applied for an interim price increase for the last year of the current five-year price-setting period. But, after considering its application, Ofwat is now consulting on a 2.4% price cut - or alternatively lopping off part of the expected price increase in the next period which begins in April 2005.
Anglian claimed it faced increased costs due to higher construction costs, customer debt and tackling sewer flooding, among other reasons. However, Ofwat also found reasons to reduce prices - especially changes to the firm's sewage sludge disposal strategy.
In 1999, Anglian had embraced a forward-looking strategy which aimed to reduce dependence on sludge disposal to land. The company, which then sent 82% of its arisings to farmland, aimed to dispose of at least 50% through a variety of novel methods centred on gasification (ENDS Report 318, pp 20-24 ).
In all, Anglian was expecting to build seven gasification plants and seven composting facilities, as well as production of aggregate and pellets.
Those plans have fallen through, because, the company says, "the market was not mature enough to accept the risks of gasification" (ENDS Report 344, pp 18-19 ). Ofwat believes that Anglian has saved itself £137 million in capital costs alone by not proceeding with the programme.
For 2005-10, Anglian is now planning to rely entirely on the agricultural land disposal route. It has proposed investments of £180 million in sludge digestion and drying capacity to manufacture a product suitable for land spreading, but with potential for use in power stations and cement kilns. The proposals will be considered by regulators over the coming year.