Average water bills will rise by £31 a year over the next five years.Photograph: d3sign/Getty Images
Water bills in England and Wales will soar by 36% over the next five years after the regulator increased the amount companies are allowed to charge.
Ofwat said that average bills will rise by £31 a year over the next five years, hitting £597 by 2030, before inflation is added. That money will be used by regional monopoly suppliers to operate the water system and invest in upgrades – as well as to provide a financial return for investors.
The five-yearly price review is critical for the 11 combined water and sewage companies in England and Wales, determining how much they can spend amid intense scrutiny of the sector. So how much will bills rise in your area, and what will the money be spent on?
The precarious state of Britain’s biggest water company’s finances mean it could collapse into a temporary government-handled administration. It is in the middle of raising £3bn in emergency cash. David Black, the Ofwat chief executive, said the financial turmoil did not affect its bills decision “at all”. It will be allowed to spend £20.5bn over the five years – a massive £4bn lower than it had requested. The company is expected to need to raise at least £3.3bn in equity, on top of the £3bn in rescue loans.
The biggest bill increases will be for Southern Water customers, up 53% by 2030, though this is less than the 83% rise the company requested. With exquisite timing, it also had to apologise on Thursday as nearly 60,000 households in Hampshire were left without water because of a fault. Neither is it looking strong on the financial front. Allowed spending of £8.5bn over the five years is 11% lower than the company had requested.
The FTSE 100 company Severn Trent was given a thumbs up overall. Its business plan was rated “outstanding”. It will be allowed to spend £15bn, up from £8bn over the past five years – although still 5% below its request. Severn Trent’s investors appeared to welcome Ofwat’s decision: the company’s share price rose by 1.5%, while the broader market fell by 1%.
Investors also appeared relatively pleased with the outcome for United Utilities, another of the three listed water companies: shares in the FTSE 100 group rose by 0.4%. The company, which has faced anger over the pollution of Windermere, will be allowed to spend £13bn over the period, up £6bn from the past five years, albeit 5% lower than requested. Important projects will include replacing six tunnel sections along the length of the Haweswater aqueduct and relining the Vyrnwy aqueduct from north Wales to Merseyside.
South West Water, owned by the FTSE 100’s Pennon Group, also received a relatively positive verdict from Ofwat on its business plan. The allowed spending of £3.8bn is £1.5bn higher than the past five years, and only marginally below what it had requested. It plans upgrades to water treatment works supplying east Devon, Exeter, Tiverton and the Bristol area. Pennon’s shares rose by 0.8%.
In August, Yorkshire received a £47m fine for “routinely” releasing sewage into rivers and seas. Ofwat allocated an extra £410m to spend on improved storm overflows, which are the key factor in sewage leaking into rivers and seas. Other investments include work to allow it to receive water from the north, from Kielder Water, the largest human-made lake in northern Europe. Yorkshire was one of the few companies to receive what it asked for: £8.3bn, up £3bn compared with the past five years.
Northumbrian will be allowed to spend £6.1bn over the five years, 3% lower than the company had requested but £2.5bn more than in the past five years. It won praise from Ofwat for reducing internal sewer flooding – but the regulator also has “elevated concern” for its finances, and it fined it £17m in August for failing to manage its wastewater treatment works properly.
Ofwat has “elevated concerns” over Wessex’s finances. The regulator allowed £4.2bn of spending over the next five years. This is £1.6bn more than the past five years – but a whacking 17% lower than the company wanted. Of what it can spend, £54m will go on early works towards building two new reservoirs, in Cheddar and the Mendips, while £13m will go on recycling water at Poole – via a wetland and the River Stour – to be drinkable.
Anglian is counted as one of the performance laggards by Ofwat. It will be allowed to spend £11bn over the next five years – £4bn more than the current period – including on two new reservoirs in Lincolnshire and Cambridgeshire. It will spend £108m on the installation of smart meters, while up to £1bn will be spent to prevent nutrient pollution in the heavily agricultural region.
Dŵr Cymru is unique among the English and Welsh water companies in that it does not have shareholders, instead being run by the Welsh government as a not-for-profit. But that did not stop it from lagging behind rivals, according to Ofwat. Dŵr Cymru will be allowed to spend £6bn – what it requested. That will be £2.2bn more than the past five years.
The Welsh company was the only one to actually meet its target to reduce pollution incidents in the latest financial year, but otherwise its performance is judged to be “average” by Ofwat. The smallest combined water and sewage company will be allowed to spend £266m over the five years, up £65m. Investment will include the Severn-Thames transfer, which will move water from north Wales all the way to south-east England.
