Water firms in England and Wales are facing demands to ramp up investment in infrastructure and cut household bills at the same time.

The regulator Ofwat's latest price review, which covers expectations for the next five years, proposes the firms collectively invest an extra £12bn in the network - on top of their current commitments.

This would help maintain assets, such as water pipes and sewers, and create additional water storage to bolster the environment and customer service, Ofwat said.

Image: The regulator has set a series of tougher targets covering leaks and improved water capture

Targets include cutting pollution incidents by more than a third, reducing supply interruptions by almost two-thirds and helping 1.5 million customers who are struggling to pay their bills.

Ofwat said its demands over leakage would save water over the period equivalent to the needs of the populations of Manchester, Leeds, Leicester and Cardiff.


It said that falling financing costs and greater efficiency demands of companies would allow for household bills to fall by an average £10 annually before inflation over the five years.

The regulator said it believed that even when the effects of inflation were included - using the CPIH measure which is currently running at an annual rate of 1.9% - the savings would still result in a significant real terms reduction in customer payments.

The draft determinations cover 14 of the 17 water suppliers in England and Wales.

Severn Trent, South West Water and United Utilities, were fast-tracked through this stage of the price review process because they were deemed to have "high-quality plans".

Image: Critics say Ofwat has proved ineffective in the past in keeping the water companies to their promises

The listed water firms - Severn Trent and United Utilities - both saw their shares hit when trading opened, down 1.1% and 2.3% respectively.

Companies were yet to give their response to the review.

Ofwat's chief executive, Rachel Fletcher, said: "The package we are unveiling today signals a brighter future for customers, with better services, a healthier natural environment and lower bills.

"To get there we are calling for extra investment of £6m each and every day to improve the environment and provide services for a growing population.

"At the same time we expect to see customers' bills cut by an average of £50.

"These are seriously stretching goals for the sector, but we know they can be achieved.

"We have seen three water companies leading the way and we now want the rest to show the ambition and drive to deliver this new era for customers and the environment."

Commenting on the consultation, Professor David Hall of the public services research unit at the University of Greenwich, said: "Ofwat and the private water companies repeatedly promise us that 5 years in the future prices will be cheaper and investment will be more reliable.

"But the last 30 years has taught us that these futures are a mirage, and that Ofwat cannot effectively control the companies.

"During that period the private companies have been allowed to take over £50bn in dividends out of the system, and burden us with £50bn in debt to pay for it."