Ofwat concerned over plans to charge ‘significantly’ more to cover utilities’ day-to-day costs

This article is more than 1 year old

This article is more than 1 year old

Water companies have been rapped on the knuckles over plans to charge customers “significantly” more to cover their day-to-day costs from next year.

The water regulator said it had substantial concerns over the business plans of Thames Water, Anglian Water, SES Water and Yorkshire Water for the early 2020s.

Ofwat delivered the unexpected rebuke in a letter urging the suppliers to reconsider the cost hikes and to act “in the best interests of customers”.

In total the four companies supply water to over 23 million customers.

The regulator said it expects suppliers to deliver a “step-change in efficiency” by 2025 so they can improve their service and protect the environment while keeping bills low.

Instead, the companies are hiking the estimated cost of supplying water to their customers in an effort to spend “significantly more money than they currently spend” on business-as-usual services.

The regulator is reviewing the business plans for 2020-25 to determine how much the companies are allowed to claim back from their customers through their bills.

Water bills in England and Wales are expected to average £415 this year, up by 2% from last year, according to Water UK. The industry group said that in real terms water bills have been falling in recent years, once inflation is taken into account.

David Black, a senior director at Ofwat, said the regulator would scrutinise each and every plan in detail to make sure they were robust enough to deliver “a high-quality, affordable and resilient service to customers in the next five years and beyond”.

“We are disappointed that revised proposals from Anglian Water, SES Water, Thames Water, and Yorkshire Water have not yet risen to the challenge we have set them,” he said.

“For this reason, we have taken the step of writing to these four companies now to allow them additional time to reconsider and ensure they are in the best interests of customers.”

The surprise shaming comes just weeks before Ofwat is scheduled to deliver an official verdict on the plans, and has “raised eyebrows” within the industry, according to one senior water company source.

The water companies were not immediately available to comment.

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Ofwat’s crackdown on costs comes amid growing political scrutiny of the water sector’s track record, and threats from the Labour party to renationalise the monopoly suppliers.

This year Thames Water ousted its chief executive, Steve Robertson, after a series of run-ins with the regulator over customer service, leaky pipes and investor returns.

Ofwat rebuffed Thames Water’s plans to spend £11.7bn in the first half of the next decade, saying the supplier should be able to deliver the same level of service for 20% less.

In response Thames is axing 650 roles from the company to “be as efficient and productive as possible”.