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Household water bills in England and Wales are expected to rise by an average of 26 per cent to £603 this year, marking the biggest annual increase since privatisation 36 years ago.
Southern Water’s customers face the biggest rise of the 11 water and sewerage companies, with bills expected to surge by 47 per cent — or £224 — to £703 from April, according to figures released by lobby group Water UK on Thursday. Thames Water, the largest and most financially troubled company, has handed its customers a 31 per cent increase that will see bills rise on average by £151 to £639 this year.
Water UK said the extra cash was needed to deliver an annual record of £20bn of investment by utilities by March next year, the first wave in a £104bn programme up to 2030. This would include the upgrading of 1,700 wastewater treatment works as well as supporting the building of nine new reservoirs.
The reservoirs, some of which will require additional surcharges to bills, were endorsed on Wednesday by chancellor Rachel Reeves as part of her economic growth agenda.
The sector regulator, Ofwat, said in December that water companies could increase bills by an average of 36 per cent by 2030. It said at the time that it would allow the utilities to apply the majority of these increases in the first year of the five-year period.
Thursday’s average bill figures are different to those announced in December as they include CPHI inflation and are adjusted for population forecasts.
David Henderson, chief executive of Water UK, acknowledged the pressure on households, pledging to double the amount of support for cash-strapped customers.
“We understand increasing bills is never welcome and, while we urgently need investment in our water and sewage infrastructure, we know that for many this increase will be difficult,” he said.
Support varies between companies as social tariff schemes, which are designed to lower bills for struggling households, involve companies surveying wealthier customers to ask whether they agree to subsidise bills for the less well-off.
Ofwat said last week that almost half of households in England and Wales had struggled to pay for their water over the past 12 months. More than 8 per cent of households — or 2.5mn people — are in payment arrears, with the average amount owed at about £822, Ofwat said.
The Consumer Council for Water, which represents customers, said many households would be “unable to cope” with bill increases, which it said represented the “largest rise in water bills since privatisation of the water industry”. Its own research showed that many households had already cut spending on essentials such as food and heating to afford bills.
The increases come in the wake of warnings from Ofwat over the financial stability of 10 companies, which receive nearly all their revenues from customer bills.
Thames Water and Southern Water, which are under particular scrutiny, are understood to be weighing an appeal to the Competition and Markets Authority after receiving lower bill increases from Ofwat in December than they had hoped.
The chief executives of both utilities took large bonuses last year despite suffering credit downgrades. Thames Water has also warned that it will run out of cash by March unless it receives approval for an emergency £3bn loan in the High Court next month.
The three listed water companies — Pennon, Severn Trent and United Utilities — have all ruled out appeals to the CMA, as has non-profit Dŵr Cymru.
David Black, chief executive of Ofwat, said that the infrastructure investment programme was “ambitious”. He added: “Where companies underperform, or investment isn’t delivered, we will hold companies to account and protect customers.”
