Households in England and Wales will see their water bills rise by an average of £31 a year, as suppliers pay to fix leaky pipes and cut pollution.
The industry regulator Ofwat said on Thursday it would allow companies to raise average bills will rise by £157 over five years to an average of £597 by 2030 to help pay for investment.
Consumer groups and politicians have put pressure on the regulator to limit the increase in bills, amid widespread criticism of the industry over leaky infrastructure and releasing sewage in Britain’s seas and rivers.
The increase is bigger than the 21% rise that Ofwat first proposed in July. Since then the regulator has been in detailed discussions with each water company over their spending plans.
The industry had asked for permission to spend £105bn over the five-year period, arguing that the increased bills would allow them to invest in the network and make it more resilient to global heating. Ofwat’s original proposal equated to £88bn in spending.
Campaigners have argued that companies have underinvested in water infrastructure and households should not face steep price rises, with particular concerns over vulnerable consumers. The increase in bills is likely to add to calls for a cheaper social tariff for vulnerable households.
Water companies will scrutinise the plans and could appeal to the Competition and Markets Authority if they believe they have not been allowed to charge households enough. Analysts have said they expect several companies to appeal in the hope of charging consumers more.
For several water companies the bills increase come amid severe financial pressure. Thames Water, South East Water and Southern Water are seen by Ofwat as the companies most at risk of financial failure and 10 of the 16 water companies in England and Wales are on Ofwat’s financial watch list.
The decision is critical for Thames Water in particular. The company, which supplies to 16m customers across London and the Thames Valley in south-east England, this week won court approval to secure a £3bn in new debt from some of its biggest creditors before it runs out of money in March.
The bills increase will be a key factor in trying to attract new investors to inject another £3.3bn in new equity investment, and prevent Thames from falling into temporary nationalisation.
