Jul 5, 2023 at 9:40 am BST
Updated 1 hour ago
Water utilities are likely to demand higher bills from 2025 to cover the cost of improving their services, regulator Ofwat said.
This comes after the biggest suppliers were heavily criticized for their record keeping of spills and plugging leaks.
Many are also heavily in debt as Thames Water is currently in danger of being taken over by the government.
Ofwat boss David Black denied there was a failure to properly regulate the industry.
However, he admitted that there were “hard lessons to be learned” and that he was “angered” by the inflated executive salaries in the industry.
Despite the criticism, Mr Black told BBC Radio 4’s ‘Today’ program that customer bills are likely to rise as companies try to make improvements.
“We expect that at the next price review, companies will demand bill increases to fund large capital spending programs, and these programs will result in environmental improvements.”
Former Environment Secretary George Eustice said last Wednesday bills would rise again by around £42 per household on average over a “long period” in 2025.
This followed a report in the Times newspaper that the increases could be as high as 40%, a figure which Mr Eustice dismissed on the grounds that it would be “much lower”.
Water UK, which represents suppliers, told the BBC that any increases are a matter for the regulator.
Campaign group Surfers Against Sewage said it would be a shame if water companies increased their bills.
It said consumers should “not shoulder the burden of mismanagement by water companies”.
“We’ve been paying water companies to provide environmental services for decades, yet they continue to pour that money into the pockets of shareholders.”
Water problems on the Thames
It emerged last week that Thames Water was struggling to find the cash to service its huge £14 billion in debt.
The company, which serves a quarter of the UK population, has been heavily criticized over sewage discharges and leaks and is under pressure to improve its services.
If Thames cannot come up with the money, it could be placed under “special administration” – where it would be temporarily re-nationalized – although Mr Black said this remained a “backstop option” and “we’re a long way from that”. .
He said Thames had until “early next year” to raise the money and currently has £4.2billion in cash reserves.
When asked if customers would have to foot the bill if the company went bust, he replied, “No.”
An Ofwat spokesman later told the BBC there were no similarities to the collapse of Bulb – the energy company that went under last year and cost taxpayers millions.
“This isn’t a Bulb moment, there’s no on and off here,” they said.
Last week, Health Secretary Neil O’Brien also tried to allay concerns about the potential impact on customers, but the influential business select committee warned taxpayers could still be concerned.
Labor MP Darren Jones told the BBC that if the government were forced to take over the running of Thames Water, “taxpayers will be left with the debt and running costs of a very large corporation”.
Ofwat says it is still waiting to see how Thames Water plans to put its finances in order and that the company has “significant” sums to raise. Discussions are currently underway to secure additional funding.
Commenting on claims the regulator had failed to prevent large water companies from going into debt, Mr Black said suppliers were responsible for their financial structures and not Ofwat, whose job it was to protect customers.
Water companies across England and Wales have until 2 October to submit their 2025-2030 business plans to Ofwat. This includes the improvement work planned for this period.
The regulator will then issue guidance early next year on how they should set the bills.
Industry body Water UK announces the proposed price increases annually, usually in February, Ofwat said.