Water bills set for hefty hike as Ofwat judgement looms

The water regulator Ofwat is set to allow bills to rise by at least 21 per cent in the next five years, as part of its long-awaited decision on the financial future of the scandal-hit industry on Thursday.

Ofwat will reveal its final determination for how much water firms are allowed to hike their bills by in the next five years, after months of representations from the water industry for a larger rise.

The proposed rises, which would start to be introduced from April next year, would see the average bill rise from £448 a year to £542 excluding inflation, in a move Ofwat says will help firms tackle the well-documented twin issues of pollution and supply.

The decision comes after the watchdog paved the way for hike of more than a fifth in a preliminary decision in July, prompting water firms and their industry body to campaign vigorously for the cap on bills to be raised further.

Water companies lobbied intensely for Ofwat to permit a more substantial rise, which they claim will help make the investment required to fix the sector’s creaking infrastructure.

On average, companies want a 40 per cent rise. Macquarie-owned Southern Water – one of the UK’s worst performing water companies – wants to raise its bills from £420 to £772, a hike of some 84 per cent, in order to upgrade wastewater treatment sites and reduce its storm overflows.

South Staffs and Cambridge has requested to raise bills by the least at 24 per cent, which is still higher than Ofwat’s preliminary determination.

Meanwhile crisis-ridden Thames Water, which on Tuesday was given the green light to begin a lengthy restructuring with a £3bn emergency loan, wants Ofwat to sanction a 53 per cent rise to bills.

Its leadership has consistently argued that unless it is given a more generous cap than the 20 per cent uplift outlined by Ofwat in the summer, it won’t get be able to attract the requisite equity investment that the regulator obliged it to seek after its credit rating was downgraded.

Ofwat has said it wants to deliver a “balanced package” which gives firms the financial security to prevent pollution and supply issues.

“We know that many customers continue to struggle with cost-of-living pressures and need extra help at this difficult time,” a spokesman from the regulator said. “Water companies in England and Wales are planning a significant increase in support for customers struggling to pay.”

But Water UK – water companies’ industry body – argues that water bills have not kept up with inflation in the past, and has proposed widening the number of households eligible for support with their bills as a concession.

A spokesperson said: “Water companies want to invest a record £108 billion to support economic growth, build more homes, secure our water supplies and end sewage entering our rivers and seas.

“We await Ofwat’s decision… and hope they give us the green light so we can get on with it.”