More than 7 million households and businesses face higher water bills after five water firms were provisionally allowed to invest more in infrastructure than previously granted.
Anglian Water, Northumbrian Water, South East Water, Southern Water and Wessex Water argued that a ruling by regulator Ofwat last year left them unable to meet environmental goals and other regulatory requirements.
They appealed to the Competition and Markets Authority (CMA), which on Thursday said Anglian and Northumbrian should be allowed to increase their bills by a further 1 per cent, Southern by 3 per cent, South East by 4 per cent and Wessex by 5 per cent.
The CMA’s decision means the companies will be allowed to spend around a fifth of the extra £2.7 billion they had collectively asked for.
Bills for Southern Water customers will now rise to an average of £638 in 2030, compared with £620 under Ofwat’s decision. Wessex Water customers face a £622 bill versus £594 and South East Water customers £286 compared with £274. The increases are smaller for Northumbrian Water customers, at £495 against £488, and Anglian Water, at £599 compared with £591.
The charity Citizens Advice said the additional increases would “stretch budgets beyond breaking point”. One in five households were already struggling with their water bills, it said. The Consumer Council for Water, a consumer group, said the hikes were unwelcome and noted three of the five companies had no plans to end water poverty by 2030.
The five companies had argued they needed to spend more on infrastructure to tackle sewage pollution and secure future water supplies as populations grow. Last year raw sewage was discharged into rivers and coastal waters in England for the longest duration on record. Anglian Water and Thames Water recorded the biggest increases in spills.
Three of the five water companies that successfully appealed to the CMA — Anglian Water, Wessex Water and Southern Water — were banned from paying bonuses to bosses this year because of serious pollution and other shortcomings.
Thames Water, which is struggling under £18 billion of debt, also appealed to the competition watchdog over Ofwat’s decision to limit its water bill increase to 35 per cent. However, the CMA ruling on Thames has been deferred while the government, regulators and the company’s creditors work on a rescue plan.
Without a bailout or a green light by the CMA to spend more, Thames could collapse into temporary nationalisation known as a “special administration” regime.
The additional water bill increases will be a political headache for the government. Steve Reed, then the environment secretary, announced wide-ranging reforms to the water industry in the summer and said households would “never again face huge shock hikes to their bills” like those approved by Ofwat.
His successor, Emma Reynolds, is now responsible for deciding how many reforms to take forward in a white paper expected later this year. The government has already chosen to abolish Ofwat and replace it with a new “super regulator”. Emma Hardy, the water minister, said: “I understand the public’s anger over bill rises — that’s why I expect every water company to offer proper support to anyone struggling to pay.”
David Henderson, the chief executive of industry body Water UK, said the CMA decision showed “Ofwat got it wrong”. “We completely understand that for some people, these rises will be very hard to bear, which is why we are tripling the level of support to vulnerable customers. But ultimately, somebody has to pay for the infrastructure,” he told Times Radio.
Ofwat said it would now respond to the CMA’s consultation, which will see a final decision on the price rises by March.
