Water regulator Ofwat has proposed a significant rise in water bills across England and Wales, with an average increase of £19 per year over the next five years, totalling £94 by 2029.
This increase, which is lower than initially requested by water companies, aims to finance a £88 billion spending package.
The investment is targeted at addressing various environmental and operational challenges faced by the water sector, including reducing pollution, improving customer service and enhancing resilience to climate change impacts.
Ofwat’s intervention has resulted in adjustments to companies’ proposed bill increases, with reductions in planned hikes from companies like Thames Water and Severn Trent.
These adjustments are part of Ofwat’s strategy to ensure investments are justified and efficiently managed, preventing customers from bearing unnecessary costs.
The investment programme includes ambitious targets such as reducing storm overflow spills by 44%, upgrading 2,500 storm overflows and investing in new water assets like reservoirs and water transfer schemes.
Furthermore, companies will be required to meet new performance targets, which include reducing operational greenhouse gas emissions and enhancing biodiversity.
Non-compliance with these targets will result in penalties for the companies.
The funding for these improvements will initially come from shareholders or borrowing, with costs eventually recovered through customer bills.
Ofwat has proposed a rate of return of 3.72% to cover the financing needs of this substantial investment programme, reflecting increased finance costs in recent years.
David Black, Chief Executive, Ofwat said: “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.
“We expect all companies to embrace innovation and go further and faster to reduce spills wherever possible.
“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.”
