Millions of households in England could face even larger water bill increases than originally expected, as the Competition and Markets Authority (CMA) prepares to deliver a preliminary verdict on industry spending plans as early as this week. Five water companies—Anglian, Northumbrian, Southern, Wessex, and South East—have appealed to the CMA for permission to raise bills beyond the limits set by the industry regulator, Ofwat. Together, these firms serve 14.7 million customers.
Thames Water, Britain's largest water company with 16 million customers, initially appealed but has paused the process amid negotiations to reduce its debt burden and secure its future. Under the privatised water system in England and Wales, Ofwat determines the amount companies can charge customers over five-year periods. In December, Ofwat said average annual household bills could rise 36% to £597 by 2030 to fund investment.
The six companies argue they need to spend more on upgrading creaking infrastructure, with any extra spending added to customer bills. S&P Global Ratings estimates the firms are requesting up to £2bn in additional spending on top of the £104bn already allowed. Water industry insiders believe the CMA is more likely to allow bill increases than cuts, given the need for investment, though there are few clues to the regulator's thinking.
The CMA initially promised provisional determinations by mid-September but has adjusted that to early October. Water companies expect the announcement as soon as the coming week. Martin Young, a former investment bank analyst, noted that Ofwat's cost of equity assumptions are lower than those used by energy regulator Ofgem, suggesting the CMA could increase spending allowances. However, a water industry source indicated political pressure to avoid major price increases, as the government plans to replace Ofwat with a new regulator.
Environment Secretary Emma Reynolds faces a political headache, having told the Labour party conference there would be 'no more ripping off the British people' while overseeing investment. She has not yet clarified how she will balance keeping bills down with increasing investment to prevent leaks and sewage overflows. Thames Water's owners this week said it may take up to 15 years to clean up sewage pollution, given the scale of investment needed.
