Thames Water customers to see bills rise by nearly £100 by 2030, Ofwat says
- Ofwat said Thames Water can increase customer bills by 22% over five years
- Ofwat’s ruling is a draft decision and kicks off a lengthy period of negotiations
- Are you worried about higher water bills? Email jane.denton@mailonline.co.uk
Regulators have imposed a 'turnaround oversight regime' on Thames Water and opposed the company's planned 44 per cent hike in consumer bills over the next five years.
In a draft verdict on England and Wales' water company business plans to 2030, Ofwat instead proposed Thames Water increase average yearly bills by 23 per cent to £535 over the period.
The watchdog said Thames Water could increase its average household charges by 22 per cent after allowing for inflation, from £436 to £535 over five years.
Thames Water is in the grips of a funding crisis and has more than £15billion of debt. It said this week that it only has enough money to continue trading until the end of May 2025.
Rejected: Regulators have imposed a 'turnaround oversight regime' on Thames Water and opposed the company's planned 44% hike in consumer bills
The water firm warned that it could run out of money by next May if it is not allowed to put up bills by 59 per cent.
Thames Water, which has 16million customers across London and the Thames Valley, will have to 'fully re-evaluate' its current turnaround strategy under Ofwat’s measures.
It will be made to publish a separate 'financial resilience plan', while Ofwat is also considering appointing a so-called independent monitor to report on the company’s progress.
The independent monitor would have 'full access' to the company’s financial information, Ofwat said on Thursday.
Thames will also have to provide a 'delivery action plan', outlining how it intends to improve its performance on sewage spills and leakage, which has been among the worst in the industry in recent years.
The watchdog also reduced Thames’ planned investment in its services, including upgrading its ageing infrastructure, to £16.9billion, down from the £21.4billion the company had proposed.
Ofwat said the increase in customers' bills it outlined on Thursday gave Thames Water the opportunity to 'make a fair set of returns' and it was now up to the utility to secure the funding it needs to avoid collapse.
'We think the determination that we've set provides Thames Water with a fair set of returns, it's now their job to go to investors and to seek to raise that funding,' Ofwat chief executive David Black told BBC radio.
In charge: Tim Weston is the chief executive of Thames Water
Turbulence: Bosses are scrambling to secure a major cash injection to keep Thames Water afloat
Bosses are scrambling to secure a major cash injection to keep Thames Water afloat, and have held talks with both existing shareholders and external investors.
But chief executive Chris Weston said on Tuesday that the investment is 'dependent on [Thames Water] securing a final regulatory determination that is … investable.'
If Thames Water does not succeed in getting the funding, it faces the prospect of being temporarily nationalised by the government and being placed in a form of special administration, meaning the taxpayer would take on the costs of the heavily loss-making water giant.
Ofwat’s ruling on Thursday is a draft decision and kicks off a lengthy period of negotiations until its final verdict in December.
But, the regulator has rarely made major deviations between its draft and final rulings in previous years, meaning today’s statement gives companies an indication of how lenient it is likely to be later on.
David Black, chief executive of Ofwat said: 'Customers want to see radical change in the way water companies care for the environment.
'Our draft decisions on company plans approve a tripling of investment to make sustained improvement to customer service and the environment at a fair price for customers.
'These proposals aim to deliver a 44 per cent reduction in spills from storm overflows compared to levels in 2021. We expect all companies to embrace innovation and go further and faster to reduce spills wherever possible.
'Today’s announcement also increases the resilience of our water supplies to the impact of climate change and will reduce how much water is taken from rivers by enabling a range of long-term water supply projects, which includes plans for 9 reservoirs.
'Let me be very clear to water companies. We will be closely scrutinising the delivery of their plans and will hold them to account to deliver real improvements to the environment and for customers and on their investment programmes.'
Household water bills in England and Wales are to rise by an average £19 a year over the next five years – a third less than the increase requested by companies, under draft proposals announced by Ofwat.
On Thursday, the regulator said water firms proposed increases averaging £144 over five years.
For example, Thames Water’s proposed increase of £191 by 2030 has been reduced to £99, while Severn Trent’s proposed rise of £144 has been cut to £93.
There are marked variations in price changes between firms.
Under the plans, Southern Water customers will face a £183 hike over five years, while Dwr Cymru customers’ bills will go up by £137 and Yorkshire Water customers will pay £107 more.
At the other end of the scale, Affinity customers will an £11 rise, while SES customers’ bills will fall by £34 on the previous five years.
Mike Keil, chief executive of the Consumer Council for Water, said: 'Millions of people will feel upset and anxious at the prospect of these water bill rises and question the fairness of them given some water companies’ track record of failure and poor service.
'Customers understand investment is urgently needed but they need reassurance that every pound of their money is going to be well spent.'
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