Household water bills to rise by an average £31 a year from April

Household water bills in England and Wales will increase by an average £31 a year over the next five years, regulator Ofwat has announced.

The increase is significantly higher than the expected average rise of around £20 a year per household, outlined in the regulator’s draft proposals in July.

However, despite the average £31 a year increase figure, households will face a heavy average hike of £86 or 20% in the next year, excluding inflation, with smaller percentage increases in each of the next four years.

The average bill will rise by a total of £157 or 36% over the next five years.

Some firms have been allowed significantly higher increases. Southern Water customers will face a 53% increase and Severn Trent households will see their bills rise by 47%, before inflation.

Thames Water is to be allowed to hike consumer bills by 35%, as the regulator also handed it an £18.2 million fine for paying “unjustified” dividends to shareholders.

The ruling falls well short of the 59% Thames Water had said it needed in the run-up to the decision, as the embattled water company tries to negotiate a bailout.

The company, which serves about 16 million people in London and the South East, is battling a funding crisis that could see it run out of cash by March.

Ofwat chief executive David Black said: “Today marks a significant moment. It provides water companies with an opportunity to regain customers’ trust by using this £104 billion upgrade to turn around their environmental record and improve services to customers.

“Water companies now need to rise to this challenge, customers will rightly expect them to show they can deliver significant improvement over time to justify the increase in bills.

“Alongside the step up in investment, we need to see a transformation in companies’ culture and performance. We will monitor and hold companies to account on their investment programmes and improvements.

“We have robustly examined all funding requests to make sure they provide value for money and deliver real improvements, while ensuring the sector can attract the levels of investment it needs to meet environmental requirements.

“This has seen us remove £8bn of unjustified costs compared with companies most recent requests. In addition, our approach to setting a rate of return has saved customers £2.8 billion.”

Ofwat said it had cut Southern Water’s requested increase by £126 (16%), Thames Water’s by £79 (12%), Hafren Dyfrdwy’s by £73 (12%) and Wessex Water’s by £44 (7%).

Industry body Water UK said: “After a decade of cuts Ofwat has finally listened to public anger and agreed a much-needed quadrupling of investment in our aging infrastructure.

“This will be the largest amount of money ever spent on the natural environment, and will help to support economic growth, build more homes, secure our water supplies and end sewage entering our rivers and seas. Each water company will now need to take time to assess what Ofwat’s decision means for them.

“We understand increasing bills is never welcome. To protect vulnerable customers, companies will triple the number of households receiving support with their bills to three million over the next five years.”

Environment Secretary Steve Reed said: “Under the Conservatives, our sewage system crumbled. They irresponsibly let water companies divert customers’ money to line the pockets of their bosses and shareholders.

“The public are right to be angry after they have been left to pay the price of Conservative failure.

“This Labour Government will ringfence money earmarked for investment so it can never be diverted for bonuses and shareholder payouts. We will clean up our rivers, lakes and seas for good.”

The Consumer Council for Water (CCW) warned the increases were “more than what many people can afford”.

CCW chief executive Mike Keil said: “These bill rises may be less than what water companies wanted but they are still more than what many people can afford.

“Customers will be hit particularly hard from April with a large chunk of these increases frontloaded into next year – on top of inflation.

“We know at least two in five households will find these increases difficult to afford but the support being offered by some water companies lacks ambition.

“The case for a single social tariff to end the current postcode lottery of support has never been more compelling.”

Tom MacInnes, director of policy at Citizens Advice, said: “These price rises will hit many households hard. While it’s encouraging to see help for customers increasing, the current dysfunctional approach to bill support in this industry means that people will continue to miss out.

“We found that more than two fifths (42%) of those likely to be eligible aren’t aware that water social tariffs exist. The Government and suppliers must work together to ensure that no one is missing out on the support they’re entitled to.”