Water bills set to rise by more than expected

The BBC understands water bills will rise more than previously expected over the next five years to fund higher costs and more investment.

Regulator Ofwat is deciding how much customer bills will be allowed to rise.

In July this year, Ofwat provisionally agreed to allow electricity bills to rise by 21% above inflation between 2025 and 2030.

But following Ofwat’s final decision at the end of the year, it now appears that bill increases may be even greater.

Later this week, the government will also announce plans for what is expected to be the biggest overhaul of the water sector since privatization in the late 1980s.

The aim is to protect customers from rising water bills while finding funding for the huge investments needed to tackle population growth, climate change and aging water infrastructure.

While the industry as a whole is facing challenges, the price increases proposed by Ofwat in July vary from company to company.

The highest agreed increase was Southern Water, at 44%, while the lowest was Affinity Water, at 6%.

Thames Water, Britain’s largest water company, was allowed to increase water bills by 23% but has since said If it can’t raise its bill by 59%, it won’t survive.

Thames shareholders earlier this year refused to inject promised capital into the company because they said it was unlikely to make any profit at proposed billing levels.

The BBC understands one of the reasons UK Water is considering allowing larger increases in bills is to reflect higher financing costs.

A new independent commission will be announced on Wednesday, with a high-profile chair appointed, to advise the government on a “proper reset” of the industry to improve performance and bring in new investment.

The committee’s review will seek input from a wide range of stakeholders, including customers, environmental agencies, investors and engineers, whose interests are not always aligned.

Customers are outraged by the scale of the spill and contamination, while investors claim the fees they are allowed to charge are insufficient to attract the investment needed to fix the problem.

Some companies are caught in what one executive described as a “doomsday loop” — underperforming companies are fined for wastewater discharges and leaks, leaving them with less money to fix the problems they were fined for.

Investors have also been criticized for the dividends and executive compensation they pay Although pollution and leaks have increased.

Simply put, no one is happy with the current setup.

Lead regulator Ofwat is expected to welcome plans to establish a new commission.

However, many believe this reflects widespread dissatisfaction with the way the industry is regulated, with some claiming Ofwat strikes the wrong balance between keeping customer bills low and encouraging investment.

The new committee is not expected to report until Ofwat makes a final decision on how much bills may rise in 2030.