Water bills to soar by an average £19 a year over the next five years, Ofwat warns

Households could see their water bills spike by around 21% a year on average over the next five years as the Water Services Regulation Authority, Ofwat, introduces a spending package proposal to help improve water company services and tackle major issues like sewage leaks.

However, water companies have argued the £19 a year rise - £94 over five years - is not enough. While Ofwat said the increase to household water bills must be limited, water suppliers said a much steeper increase is needed to make the necessary improvements to service, water supplies and reduce pollution.

While the proposed bill hikes might not be as high as anticipated, it excludes inflation and other rising costs like high mortgage rates , council tax rises and energy bills .

David Black, chief executive of Ofwat said, “Customers want to see radical change in the way water companies care for the environment. Our draft decisions on company plans approve a tripling of investment to make sustained improvement to customer service and the environment at a fair price for customers.

“We will be closely scrutinising the delivery of their plans and will hold them to account to deliver real improvements to the environment and for customers and on their investment programmes.”

Ofwat says the extra funding would cut sewage spills by 44%, with nearly £35 billion set out for reducing pollution levels, improving customer service, river and bathing water quality, and working towards reducing the impact of climate change. However, all of this is to be done in a way so that “customers will not pay twice”, he said.

We look at the proposed hikes, how they’re set to impact consumers and suppliers, and what this means for investors in the long run.

Water bills: how much more will you pay?

Ofwat has proposed a total spending package of £88 billion by water companies, which is £16 billion lower than what firms had in their business plans.

For consumers, this means that water bills are set to rise by 21%, which averages to £19 a year or £94 over the next five years. Some households could even be paying as high as £727.

Mike Keil, the chief executive of the Consumer Council for Water , said, “Millions of people will feel upset and anxious at the prospect of these water bill rises and question the fairness of them given some water companies’ track record of failure and poor service.

“Customers understand investment is urgently needed but they need reassurance that every pound of their money is going to be well spent. Trust in water companies has never been lower and that won’t change until people see and experience a difference – whether that’s having the confidence to swim at their favourite beach or receiving help if they are struggling to pay their bill.”

These proposed bill hikes come amid water company bosses pocketing over £25 million in bonuses, handing dividends to shareholders, heavy pollution and sewage spills. However, water companies argue that these increases are not enough to tackle sewage spills, cut pollution levels or carry out maintenance repairs.

Source: Ofwat

Water bills increase - is it enough?

Industry body Water UK has slammed Ofwat’s proposals calling it the “biggest ever cut in investment” and accusing it of repeating past mistakes of failing to tackle water shortage. A spokesperson for Water UK said, “Water companies proposed to invest £105 billion because it is the minimum needed to meet the legitimate concerns we’ve heard from the public about our environment and our economy.

“Ofwat is right to want to ensure customers receive value for money and that is why protections are in place to ensure customers only pay for projects that are new, necessary and value for money. But for far too long, Ofwat has failed to be realistic about the levels of investment needed and what it will take to deliver and maintain necessary infrastructure.

We cannot allow this pattern to repeat itself. Water companies are ready to invest in an unprecedented overhaul of the country’s water and sewage infrastructure. Ofwat now needs to let them get on with it."

Thames Water , which was privatised in 1989, had proposed a bill hike of £191 over the next five years. With nearly £15 billion in debt, Thames said it would have no money left by 2025 if it didn’t raise equity of £3.25 billion. However, Ofwat has said that it would bring down the hike to £99.

Similarly, Severn Trent’s £144 hike has been brought down to £93. However, the price rises vary by region, so some regions will see greater increases. Southern Water customers will go up by £183 or 44% over the next five years, while Dŵr Cymru Welsh Water bills will increase by £137, and £107 for Yorkshire Water customers.

What has the Labour Party said?

The Labour Party’s environment secretary Steve Reed is prepared to clamp down on payouts and illegal sewage pumping into waterways.

Steve Reed said, “We will never look the other way while water companies pump sewage into our rivers, lakes and seas. This unacceptable destruction of our waterways should never have been allowed, but change has now begun so it can never happen again.

“I have announced significant steps to clean up the water industry to cut sewage pollution, protect customers and attract investment to upgrade its crumbling infrastructure. That change will take time.

Over the coming weeks and months, this Government will outline further steps to reform the water sector and restore our rivers, lakes and seas to good health. These steps sit alongside the Government’s manifesto commitments to put failing water companies under tough special measures to clean up our waterways.”