Thames Water could raise bills to as much as £627 a year to pay to fix its leaky network, after promising to invest up to £3bn more over the next five years.
The embattled water supplier said on Monday that it had updated its spending plans for 2025 to 2030 after discussions with the industry regulator, Ofwat, and bills could rise as much as 44% under its most ambitious spending plans.
The proposals to raise bills even further immediately drew anger from politicians and consumer groups, who argued that households struggling with the cost of living crisis should not have to pay for underinvestment in Thames’s creaking infrastructure.
In October Thames submitted its business plan, known as a PR24, to Ofwat, pledging to spend £18.7bn over the period and raise bills by 40% to £610, or by 56% including inflation.
The company has now said it will spend a further £1.1bn – totalling £19.8bn – to address environmental concerns over sewage dumping in the sector.
Thames said it could spend £1.9bn on top of this – totalling £21.7bn over the period – depending on the availability of workers in its supply chain, which it would agree on an annual basis with Ofwat. If this occurred, bills for Thames’s 16 million customers would reach £627 by 2030, a 44% increase, excluding inflation.
Thames did not specify exactly what the £1.1bn would be spent on. Industry sources said the bulk of the money would probably be spent ensuring the company could meet new statutory requirements to protect the environment set out by the Department for Environment, Food and Rural Affairs.
Thames is under intense scrutiny amid fears over its financial stability and questions over whether its shareholders are willing to pay upfront for its investments, before they are recovered from consumers through bills.
The government is preparing plans in case the debt-laden company collapses, including renationalisation. The Guardian revealed last week that Whitehall contingency plans for a renationalisation could include adding the bulk of its £15.6bn debt to the public purse, with some lenders to its core operating company potentially losing up to 40% of their money.
Thames said on Monday it had been able to up its spending without increasing bills on top of the original forecasts “due to a rebalancing of operating and capital expenditures”.
The Thames Water chief executive, Chris Weston, said: “Our business plan focuses on our customers’ priorities. As part of the usual ongoing discussions relating to PR24, we’ve now updated it to deliver more projects that will benefit the environment. We will continue to discuss this with our regulators and stakeholders.”
Shareholders said last month they were not willing to put in a promised £500m while a standoff between Thames and Ofwat continued.
It is understood that Monday’s update has not changed the view of shareholders. Last month they claimed that Ofwat had “not been prepared to provide the necessary regulatory support” for Thames’s business plan.
The Guardian revealed last week that Thames was considering issuing more debt to help fund its plans, adding to its £15.6bn debt pile.
Mike Keil, the chief executive of the Consumer Council for Water, said: “On the surface the proposal for more investment from Thames Water is a positive step for its customers that have endured some of the worst customer service in the sector.
“We should not lose sight of the fact that only 16% of its customers thought the company’s proposed bill rises in its five-year plan were affordable. This announcement appears to offer nothing to ease the fears of those already struggling to pay.”
The Liberal Democrats’ Treasury spokesperson, Sarah Olney, said: “It would be an absolute disgrace if customers are forced to foot the bill for Thames Water’s shambolic failings. Ofwat cannot allow these bill hikes to go ahead.”
Ofwat is due to give its provisional verdict on Thames’s business plan, and those of its peers, on 12 June and publish final decisions in December.
In the submission to Ofwat, the company said it was discussing its “green economy recovery” plan (GER) with the regulator. The ailing programme, drawn up in the pandemic, was supposed to allow Thames to add £72m to bills to fund a smart meter rollout in the Thames Valley.
The company said extreme weather in 2022 had hurt the “achievability” of hitting its targets, and discussions with Ofwat would “determine if we can proceed with the GER programme”.
