Water bills to rise by 36 per cent to address infrastructure issues

WATER regulator Ofwat has announced that household water bills will increase by an average of 36 per cent over the next five years to fund major improvements in the country’s water infrastructure.

This move aims to address long-standing issues in the privatised water sector, including sewage spills and ageing systems.

The approved rise is lower than the 44 per cent increase requested by companies but significantly higher than the 21 per cent Ofwat had indicated in July.

The higher investment comes after the government urged Ofwat in October to allow more spending to tackle sewage spills and prevent crises like the one faced by Thames Water, the largest supplier, which has been at risk of nationalisation.

Ofwat said the increase would fund a £104 billion upgrade to reduce sewage discharges and improve infrastructure. A claw-back mechanism will ensure that unspent funds are returned to customers.

Critics blame private water companies for prioritising shareholder dividends over investment in infrastructure, while the sector argues that Ofwat’s focus on keeping bills low has limited their ability to invest.

Under the new plan, companies will not receive the full increases they had requested. Thames Water, which had sought a 53 per cent rise, will be allowed a 35 per cent increase.

Southern Water, which requested the highest rise at 83 per cent, will increase bills by 53 per cent. Ofwat said the rise for Thames Water could help it attract over £3 billion in new equity to stay afloat.

These increases come as households are already struggling with the cost of living crisis, which has seen sharp rises in energy and food prices.

Ofwat also fined Thames Water £18 million for breaching its obligations by paying two dividends to its parent company in 2023 and 2024 without linking them to performance.

(With inputs from Reuters)