Millions of households in England will have to pay even higher water bills than had previously been announced, after five water companies appealed to the UK’s competition regulator.
The companies – Anglian, Northumbrian, Southern, Wessex and South East – had appeals to the Competition and Markets Authority (CMA) accepted, giving them permission to raise bills still further.
They argued that the price rises set by the regulator Ofwat – which average 36% over the next five years – were not enough to deliver the needed investment in infrastructure.
The CMA said the five companies could raise bills higher that the original Ofwat decision, by an additional 3% — about £12 per year on average — as borrowing costs had risen.
The five water companies serve more than 7 million household and business customers, and had asked for much larger increases to bills than the ones granted.
An independent group of experts appointed by the CMA said the firms had asked to increase bills to raise a total of £2.7bn in extra revenue, but it had allowed only 21% of this, equating to an additional £556m.
“We’ve found that water companies’ requests for significant bill increases, on top of those allowed by Ofwat, are largely unjustified,” said Kirstin Baker, who chaired the group of experts appointed by the CMA.
“We understand the real pressure on household budgets and have worked to keep increases to a minimum, while still ensuring there is funding to deliver essential improvements at reasonable cost.”
Water companies finance much of their investment plans with borrowed money. The CMA said part of the reason it had allowed a rise was because interest rates on those loans have risen, making it more expensive for the firms to carry out their plans.
Troubled firm Thames Water also appealed for higher price rises, but has deferred its case until late October while it tries to fix a rescue bid.
Water firms have been told by authorities to fix outdated infrastructure which has been found to be the cause of much river and water pollution. The Environment Agency said serious pollution incidents by water firms went up by around 60% in a year.
The government’s water minister Emma Hardy said she expects every water company to “offer proper support to anyone struggling to pay”.
The CMA’s findings will lead to an additional increase on average of “£1 per household, per month” for customers of the water firms that appealed, said David Henderson, chief executive of Water UK which represents water firms.
When asked by the BBC’s Today programme why the firms themselves can’t pay for the needed upgrades, Mr Henderson said shareholders had already invested a lot their own money, and eight water firms had made a loss in 2024.
“They [investors] don’t have to put money into this sector, they don’t even have to put money into this country,” he said, adding that many “haven’t made a profit in years. This isn’t an industry awash with cash. It is an industry providing vital infrastructure”.
The CMA’s conclusion, which is provisional and needs to be approved by Ofwat, means Anglian and Northumbrian should be allowed to increase their bills by a further 1%, Southern by 3%, South East by 4% and Wessex by 5%.
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