Millions of households across England may find their water bills increasing by even more than was previously expected. This surprising news comes even as the sector’s competition watchdog, Ofwat, prepares to announce its own preliminary ruling. They’ll be judging the industry spending plans later this week. Everyone from pharmaceutical companies to grocers to retailers has an idea on how to maintain price competitiveness. They argue that Congress must prioritize investments in basic infrastructure rebuilding.
At the recent Labour party conference, Shadow Environment Secretary Rebecca Reynolds went as far to claim. She promised an end to “the shakedown of the British taxpayer.” Her comments signal a commitment to addressing the financial pressures facing consumers, although she has not yet clarified how her plans will reconcile the need for investment with the objective of keeping bills manageable.
Reynolds specifically called for greater accountability in ensuring all these new investments would be “good for jobs, consumers—and good for growth.” The challenge remains significant. Labour’s former Environment Secretary Steve Reed even went as far as to say that he is adamant that bill payers should never be subjected to surprise bill increases as seen last year.
Ofwat will soon notify us that the average annual increase in household bills come 2025/26 will be at least 36%. This increase will bring the costs up to £597 by 2030. This long overdue increase would help pay for the kind of essential investments necessary to stop leaks and sewage overflows before they happen. Every five years, the UK’s water regulator, Ofwat, sets the maximum tariffs that water companies can levy on their customers. This important regulation makes sure that any possible price hikes are subject to close examination.
As it stands, five water companies—Anglian, Northumbrian, Southern, Wessex and South East—have lodged appeals to the CMA. This is creating an already tenuous situation made worse by the fact that these companies are seeking permission to raise bills beyond the limits set by Ofwat in order to finance upgrades to aging infrastructure. Martin Young, principal of Aquaicity consultancy and GMT member, hopes to see even more spending permitted. Those suggestions aren’t entirely out of character—regulators have been known to respond positively to these kinds of appeals.
Reynolds’ decision this week to delay a meeting with the water company CEOs further clouds the situation. Together, the five companies’ service areas cover just over 14.7 million customers. In light of this huge number, the stakes are higher for consumers and regulators alike.
As debate continues to escalate, those on the industry’s side are raising alarm bells. They attack Thames Water’s restructuring plan as a short-sighted “blinkered approach.” Such sentiment speaks to the larger narrative – just how well is the industry doing at tackling its operational/safety challenges as it strides towards meeting recently adopted regulatory mandates?
All stakeholders are understandably keen to hear Ofwat’s decision. Either way, this decision will have significant consequences for the future capital funding of water services in England. The balance between necessary investment in infrastructure and ensuring affordable rates for consumers will be critical in shaping policy moving forward.