Millions of households face jump in water bills after regulator backs more price rises | Water industry

Water bills for millions of households in England will rise more than expected after the competition regulator gave the green light to five water suppliers to increase charges to customers but the companies rejected most of their demands.

An independent group of experts appointed by the Competition and Markets Authority (CMA) has decided to temporarily allow companies to collectively charge customers an extra £556 million over the next five years, it was announced on Thursday. This was just 21% of the £2.7 billion claimed by firms.

The five companies (Anglian, Northumbrian, Southern, Wessex and South East) together serve 14.7 million customers. Companies applied to the CMA in February to increase their bills more than industry regulator Ofwat had previously allowed.

Water bills have become the subject of significant political debate in the UK in recent years, due to widespread disgust at the infiltration of harmful sewage into Britain’s rivers and seas.

Water minister Emma Hardy said: “I understand public anger about bill increases, so I expect every water company to offer appropriate support to anyone struggling to pay.

“We’ve ensured investment money is spent on infrastructure improvements, not bonuses, and we’re creating a tough new regulator to clean up our waterways and restore confidence in the system.”

English and Welsh water companies are mostly privately owned, but the prices local monopolies can charge customers are regulated by Ofwat over five-year periods. Ofwat said in December that average annual household bills could rise by 36% to £597 by 2030 to help pay for the investment.

Ofwat said companies could spend a total of £104bn paid by consumers.

Allowed bill increases were well below the demands of water companies.

Anglian Water, which serves the east of England and Hartlepool, called for the average annual household bill to increase to £649 (a 10% increase), but this was only achieved by £599, or 1%. Northumbrian, based mostly in north-east England, asked for £515, or 6%, and was given £495, again 1%.

South East Water, which in most counties does not provide sewage services but only drinking water, asked for an 18% increase to £322, but was allowed a 4% increase to £286. Southern Water, on the south-east coast of England, called for a 15% increase to £710. This would have been the highest bill in England and Wales, but was only allowed to rise 3% to £638.

Wessex Water, in the south-west of England, claimed an 8% increase to £642 and was awarded an 5% increase to £622, the largest proportionate increase, upon appeal.

Kirstin Baker, chair of the objections ruling group, said: “We found that water companies’ demands for significant bill increases on top of what Ofwat has allowed are grossly unjustified.

“We understand the real pressure on household budgets and have worked to keep increases to a minimum, whilst ensuring there is funding to deliver significant improvements at an affordable cost.”

The South, South East and Wessex had the biggest gaps between what they originally requested and what Ofwat gave in December.

The CMA group’s decision will also be carefully considered by Thames Water, the UK’s largest water company with 16 million customers. Thames also initially objected but agreed to hold off while the utility and its creditors negotiated a restructuring plan with Ofwat to reduce its debt burden and prevent it from falling under interim government control.

Thames is still considering asking for a further £4bn. People close to Thames Water have criticized Ofwat’s approach to setting prices, arguing that the company needs much more money to fix its performance on pollution.