The UK government has told water companies to put “consumers above profits” after the industry admitted households would be required to foot the bill for a £10bn investment program to cut wastewater spills.
Ruth Kelly, chair of the UK’s Trade and Industry body, acknowledged Thursday that a proposal by water companies to increase investment to help prevent sewage spills over the rest of the decade would be paid for by customers with “modest increases to their bills”.
But Downing Street said on Thursday the government did not want families to bear the burden of investing.
“We’ve made it clear all along that we don’t want to see things that disproportionately impact customers’ bills, especially since we know there are people across the country who are struggling with the cost of living, which is why we’ve extended our assistance to that area.
The proposed increase in bills has yet to be approved by regulator Ofwat, which said it would “check the details” as part of its regular process, which requires companies to submit their business plans by October. The final decision will be made by 2025.
Ofwat said it would consider whether the proposed £10 billion investment is new work or projects companies have already pushed for, as well as how it fits with other needs such as urgent requirements to repair leaky pipes.
“Water companies must explain how their proposals will be financed, the proposed impact on billings and the expected return for shareholders and lenders,” the regulator said.
Only 60 per cent of the £2.2bn that water companies could have invested in wastewater infrastructure by 2025 has been spent so far, according to Ofwat.
It has already laid out a proposal to bring £1.6 billion of expenditure originally planned for 2025-2030 into the next two financial years to reduce sewage spills from storm floods.
Household bills increased by 7.5 per cent in April – the biggest rise in two decades – at an average of £448 a year.
It is not yet known what the impact on billings will be if the £10 billion investment is agreed as it is determined according to the Ofwat formula.
Shadow environment secretary Jim McMahon told Sky News that water companies should not pass the cost on to consumers. “We cannot allow families to bear the brunt of the cost-of-living crisis because the water companies still think they can continue to operate as normal.”
Sir Dieter Helm, professor of economic policy at the University of Oxford, said Water UK’s announcement was “more than an apology”.
“If they feel sorry for their many failures,” he said, “I want to know what they will do to make it right.” “If the answer is that they will ask the regulator to agree to finance another £10 billion from clients, that doesn’t sound like an apology. That seems like a very profitable option for them.”
All it’s saying is that if Ofwat throws more customer money at us, we’ll do more.”
