This boils down to a list of reasons for going back to Ofwat once a year and asking permission for further price ncreases. Apart from the usual excuses such as bad debts and higher than expected take-up of water meters, the regulator has also “parked” £2bn worth of environmental schemes which consumers may end up paying for between now and 2010.So the headline increase in bills next April is kept low enough not to upset the voters. As a consequence, a 13 per cent increase in bills is being seen as a good result by customers and investors alike.Five years from now, a daily water supply will still cost Londoners less than a daily paper. But on balance, Fletch looks to have played his hand with a consummate politician’s touch.How else to explain a set of price increases that kept customers, investors and the environmental lobby all broadly happy at the same time.

The industry asks for a 29 per cent rise in bills over five years It gets 13 per cent. The Environment Agency wants £21bn sunk into capital expenditure programmes to stop sewer flooding and the like It gets less than £16bn. Make sense of that.In truth, water price reviews are as much about managing expectations as giant capital investment programmes. Fletch began the softening up process two years ago by telling customers they could expect significantly bigger bills from 2005 onwards after his predecessor had squeezed the industry dry of cost savings last time around.Whenever a City analyst suggested, however, that this meant a “benign” outcome for the industry, the regulator fired off a warning shot. And yet, water company shares rise across the board, the environmentalists get 94 per cent of their wish list granted and the consumer lobby says customers have done better than expected.

Tricky stuff to handle, water Politically, that is. Too big a price rise and voters could go off the deep end next April just as Tony Blair gets to the polls. Shares in Barclays surged by as much as 10 per cent today after speculation of a bid from US financial giant Citigroup swept through the London market.
Dealings in Barclays shares were the heaviest of any blue-chip company as investors piled into the stock on the hope of a lucrative takeover deal.The interest also forced up the share prices of other major banking firms after the sector had earlier been languishing in negative territory. Too small an increase and raw sewage might begin to back up all over New Labour as well as the home furnishings.
There is still an outside chance that ministers will stick their oar into the draft price limits announced yesterday by the water regulator Philip Fletcher before he finalises them in December and bills start to drop on to doormats next April. Barclays shares later settled back to stand 5 per cent higher at 506p.There was no comment today from Barclays on the speculation, which linked Citigroup to a bid in the region of 700p a share – worth around £45 billion.The world’s biggest bank has been seen as potential bidder as it is thought to be keen to boost its presence in the UK market while Barclays also has the lure of an attractive investment bank business.

Citigroup has 275,000 employees and manages 200 million customer accounts worldwide.Jeremy Batstone of Charles Stanley stockbrokers said: “I believe there may have been interest in the past but now is not the right time. We are looking at a sector that is reporting peak levels of profitability and it’s difficult to see how those levels can rise as aggressively again.”The speculation emerged a day after Barclays chief executive Matt Barrett announced a 23 per cent rise in half-year profits to a record £2.4 billion.Spanish bank Santander Central Hispano recently sparked takeover interest in the sector by agreeing a £8 billion deal for Abbey National.. It creates a bit of nervousness and pushes the price higher.”Today’s hike is the latest in a string of rallies which have pushed the cost of crude to new records throughout the past week.Fears of terrorist attacks, disruptions to Iraqi crude exports, and financial troubles at Russia’s largest oil producer, Yukos, have all fuelled the soaring prices.Middle Eastern oil cartel Opec said today that it may decide at its next meeting in September to increase its crude oil output by an additional 1.5 million barrels a day.Opec president Purnomo Yusgiantoro said: “We are ready to add another 1.5 million barrels a day but will discuss it first during the next meeting in Vienna.”He said Opec members, including Iraq, are currently pumping 30 million barrels of crude oil a day.. John Sexton, managing director of Thames Water: “This week’s storms emphasise the challenge we face, and we are sure customers whose properties are at risk of sewer flooding will be very disappointed.” Ofwat said it had included 94 per cent of the schemes put forward by companies to enhance the environment and quality of drinking water. Work on sewer flooding would help 80 per cent of homes affected nationally, it said.The consumer watchdog WaterVoice said the regulator’s plans were “better than expected”. It added the Government had to tackle the problem of affordability for those customers who were on a low income..