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Water companies in England and Wales have been told to cut £114mn off bills next year, after the regulator found they had performed poorly on most metrics including leakage and sewage spills.
Ofwat, the industry regulator, said on Tuesday that nearly all of the 17 water and sewage companies missed targets on pollution, water leakage and customer service. Less than half of the companies achieved their performance goals on cutting sewage outflows into rivers, coastal waters and lakes.
None of the companies reached the top “leading” category for 2022-23, the regulator said. Seven were categorised as “lagging” — the worst category — including Anglian Water, Dŵr Cymru, Southern Water, Thames Water, Yorkshire Water, Bristol Water and South East Water.
However, customers are unlikely to see their bills go down, as the deductions will be more than offset by inflation-linked increases that suppliers are allowed to apply each year.
Water and sewage bills rose by an average of 7.5 per cent in April to about £448 a year per customer.
David Black, chief executive of Ofwat, said it was “disappointing news for all who want to see the sector do better”.
“It is not going to be easy for companies to regain public trust, but they have to start with better service for customers and the environment. We will continue to use all our powers to ensure the sector delivers better value,” he added.
Ofwat said 13 of the 17 water companies spent less on improving infrastructure than they were allowed, though that was an increase on last year.
The intervention comes as water companies prepare to submit their business plans to the regulator on Monday. The plans outline how much they want to be able to raise bills to invest in services and infrastructure over the next regulatory period between 2025 and 2030. Some companies are asking for bill increases of up to 50 per cent.
Ofwat will make a decision in December next year.
The regulator’s findings will pile pressure on water companies, which are struggling with rising inflation that has affected energy, debt servicing, construction and labour costs.
Colm Gibson, managing director at Berkeley Research Group, said Ofwat “appeared to be taking a particularly tough stance given the pressures on all companies at the moment”.
“This will be noted by investors, especially if Ofwat is asking them to inject further equity.”
Thames Water, for example, has received £550mn — the first equity injection since privatisation. It has also agreed a further £750mn by 2025 which is yet to be received and is subject to certain conditions. The company has indicated it requires another £2.5bn beyond that.
Mike Keil, senior director at the Consumer Council for Water, said: “Customers are tired of not getting the service they deserve for the things they care about. It’s right and fair that people get their money back when they don’t receive the services they were promised by some water companies. People want assurance that their water bill is good value for money.”
