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Above inflation water bill rises approved

Water regulator Ofwat has defended its decision to allow above inflation water bill increases announced last week.

It said the rises will help to pay for around £25bn of investment between 2015 and 2020.

Ofwat also said the increase was much lower than the water companies asked for last time their spending plans came up for review.

“Back in 2009, companies wanted bill rises of 10% above inflation,” said Ofwat chief executive officer Regina Finn. “That didn’t chime with what customers told us they wanted.”

The average combined annual household water and sewerage bill in England and Wales is set to rise by 3.5%, the equivalent of about £13, including 3% for inflation.

Average increases vary from £7 a year for Dŵr Cymru Welsh Water and Severn Trent customers to £23 a year for those in the Southern Water area.

“Customers can’t choose their supplier. It’s our job to make sure they are protected,” said Finn.

“We will make sure customers get value for money, and if companies fall short in delivering their investment promises, we will take action. In the past seven years, we have made companies pay out around £550M where they have underperformed,” she added.

Southern Water chief customer officer Darren Bentham said the increase would help fund his company’s £1.8bn investment programme, much of which is needed to ensure compliance with European legislation.

“Our five-year spending programme includes more than 330 environmental projects - that’s more than any other water company and makes up a large part of our investment,” he said.

“These projects are in response to new European legislation and will have many environmental benefits.”

The largest percentage increase is at Thames Water, where customers’ bills will go up by an average of 5.5%.

The company defended the increase, saying its average household bills are the second lowest in the industry.

“We are providing an essential service at an average cost of just under £1 a day for each household - and with each of these households using on average more than 600l a day that is exceptional value,” said Thames Water chief executive Martin Baggs.

He added that the company was currently spending more than £1bn a year on improvements.

Last month Ofwat announced that it wants to change the way it regulates the water and sewerage sectors, with more emphasis on efficiency, customers, and sustainability.

“There are longer term challenges if we are to continue to keep bills down,” said Finn. “Unpredictable rainfall, and population growth in areas where water is already stretched, means we need to get better at managing and sharing our water. If we don’t, customers will lose out.”

She said Ofwat’s proposed changes, combined with recommendations in the Draft Water Bill, will create £3bn of benefits for customers.

“We cannot afford to stand still, if our water supplies are to remain both affordable and sustainable in the decades to come,” said Finn.

ICE water expert panel chair Michael Norton said that increasing household bills was not enough to tackle long term supply problems, and more should be done to reduce usage.

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