Water bills to rise by 36% after Ofwat review

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UK water regulator Ofwat will allow utilities in England and Wales to raise customer bills by an average of 36 per cent by 2030, a larger increase than it had previously indicated, but still short of the rises requested by troubled companies such as Thames Water.

Ofwat announced the bill increases in its “final determination” on the complex set of measures and metrics governing Britain’s privatised water companies for the next five years.

“Water companies now need to rise to this challenge, customers will rightly expect them to show they can deliver significant improvement over time to justify the increase in bills,” said David Black, Ofwat’s chief executive.

The regulator also fined Thames Water £18mn after finding that the company’s dividend payments last year breached its licence conditions.

The bill rises are higher than the 21 per cent average increase Ofwat indicated it would allow earlier this year. The increases mean bills will rise by an average of £31 a year before inflation between now and 2030.

Thames Water will be allowed to raise bills by 35 per cent, far lower than the 53 per cent rise requested by the near-insolvent utility.

Water companies have been locked in negotiations with Ofwat over how high they can raise bills between 2025 and 2030. The industry has pushed for hefty increases, saying they are needed to fund investment in ailing infrastructure.

Since the industry’s privatisation in 1989, water companies have been required to reach settlements with the regulator every five years covering bill increases, the amount they can invest and the returns their investors can make.

The prolonged crisis at Thames Water has threatened to drive investors away from the industry, raising the stakes for Ofwat. Thames Water, the UK’s largest water company, has warned that an adverse ruling would jeopardise its efforts to raise new equity from investors.

Problems at UK water companies and pollution of rivers and seaside areas have also triggered public anger.

Steve Reed, environment secretary, said the public was “right to be angry” about the performance of the water industry and blamed the previous Conservative government.

“They irresponsibly let water companies divert customers’ money to line the pockets of their bosses and shareholders,” he said.

The Labour government would “ringfence money earmarked for investment so it can never be diverted for bonuses and shareholder payouts”, Reed added.