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Household water bills are to rise by an average of £94 over the next five years under proposals announced by the regulator Ofwat.
Ofwat said the average rise was 21 per cent, or around £19 per year. However, the increases vary by region, with Southern Water’s rising by £183, an increase of 44 per cent, Thames customers will see an increase of £99 or 23 per cent and Anglian £66 or 13 per cent.
The regulator said water firms proposed increases averaging £144 over five years. For example, Thames Water’s proposed increase of £191 by 2030 has been reduced to £99, while Severn Trent’s proposed rise of £144 has been cut to £93.
The proposed bill increases come amid public fury around firms’ rampant polluting of waterways with sewage spills as they continue to hand dividends to shareholders, and bonuses to executives – something which Labour has pledged to clamp down on. Sewage spills into England’s rivers and seas more than doubled in 2023.
The environment secretary, Steve Reed, met on Thursday with the bosses of 16 water firms to outline reforms aimed at ending the crisis in the sector. The firms all signed up to a package put forward by Mr Reed, including the government ensuring funding for investment in infrastructure is ringfenced so that it is only spent on upgrades that benefit customers and the environment.
Water companies will also be forced to amend their articles of association to place customers and the environment at the heart of their objectives. Mr Reed will also instruct Ofwat to give consumers more power, setting up “customer panels” through which they can summon water bosses to answer questions. And the government will more than double the amount of compensation those whose services are interrupted are eligible for.
Mr Reed said: “Today’s water bill rises are the result of years of failure.
“The new government will force water companies to tackle illegal sewage dumping into our rivers, lakes and seas. Firm action should have been taken much earlier to ensure money was spent on fixing the sewage system, not syphoned off for bonuses and dividends.
“The decisive steps set out today mean this will never be allowed to happen again.
“After meetings with water bosses this afternoon, they have now signed up to my initial package of reforms as we work towards cleaning up our water, prioritising the interests of water customers and the environment, and fixing our broken sewage system.”
Ofwat also said they will impose a “turnaround oversight regime” on Thames Water, with the heavily indebted Thames, which has 16 million customers across London and the Thames Valley, having to “fully re-evaluate” its current turnaround strategy under the regulator’s measures.
It will be made to publish a separate “financial resilience plan”, while Ofwat is also considering appointing a so-called independent monitor to report on the company’s progress. The independent monitor would have “full access” to the company’s financial information, Ofwat said.
Thames will also have to provide a “delivery action plan”, outlining how it intends to improve its performance on sewage spills and leakage, which has been among the worst in the industry in recent years. Thames is in the grips of a funding crisis and has more than £15bn in debt. It said this week that it only has enough money to continue trading until the end of May 2025.
Bosses are scrambling to secure a major cash injection to keep it afloat, and have held talks with both existing shareholders and outside investors. But chief executive Chris Weston said on Tuesday that the investment is “dependent on [Thames] securing a final regulatory determination that is ... investable”.
If Thames does not succeed in getting the funding, it faces the prospect of being temporarily nationalised by the government and being placed in a form of special administration, meaning the taxpayer would take on the costs of the heavily loss-making water giant.
Ofwat’s proposed bill rises can be challenged by the water firms – and the measures against Thames – with a final determination due at the end of the year. The regulator’s proposals follow firms’ suggestion to increase their total spending by £29bn, split between a £5bn increase in the core costs for running their business and a £24bn rise in spending to meet requirements set by governments and for other environmental improvements.
Ofwat chief executive David Black said: “Customers want to see radical change in the way water companies care for the environment. Our draft decisions on company plans approve a tripling of investment to make sustained improvement to customer service and the environment at a fair price for customers.
“These proposals aim to deliver a 44 per cent reduction in spills from storm overflows compared to levels in 2021. We expect all companies to embrace innovation and go further and faster to reduce spills wherever possible.
“Today’s announcement also increases the resilience of our water supplies to the impact of climate change and will reduce how much water is taken from rivers by enabling a range of long-term water supply projects, which includes plans for nine reservoirs.
“Let me be very clear to water companies – we will be closely scrutinising the delivery of their plans and will hold them to account to deliver real improvements to the environment and for customers and on their investment programmes.”
Mike Keil, chief executive of the Consumer Council for Water (CCW), said: “Millions of people will feel upset and anxious at the prospect of these water bill rises and question the fairness of them given some water companies’ track record of failure and poor service.
“Customers understand investment is urgently needed but they need reassurance that every pound of their money is going to be well spent.
The proposals are part of the 2024 Price Review (PR24) and cover the period from 1 April 2025 to 31 March 2030.
Ofwat said its scrutiny of companies’ cost proposals, to ensure they deliver efficiently, had led to a £16bn reduction.
According to the Environment Agency, there were 3.6 million hours of spills last year – equal to about 400 years – compared with 1.75 million hours in 2022.
The large amount of water lost to leaks in the system also raises widespread concerns, particularly in dry periods when consumers face hosepipe bans.
Press Association contributed to this report
