Water bills in England and Wales will rise by an average of £94 over the next five years, under plans set out by the regulator, as under-fire water companies charge customers to pay for investment to stop sewage spills and fix leaky pipes.
The sum is a third less than the increases requested by companies, and amounts to a rise in bills of about £19 each year over the period.
It came in a review by Ofwat, which examined the spending plans of English and Welsh water companies for 2025-30. The plans were submitted last October, and Thursday’s report represents Ofwat’s draft view, with a final decision scheduled for December.
Customers of struggling Thames Water will face a 22% increase in their bills over the next five years after the industry regulator limited a larger rise proposed by the company.
Ofwat said Thames would be allowed to increase bills by £99 to £535, £92 less than the company had proposed. Thames had asked the regulator to raise bills by 44% over the next five years.
The biggest bill increase Ofwat allowed were from Southern Water, with a £183 rise to £603, Dŵr Cymru in Wales, which will increase bills by £137 to £603, and Hafren Dyfrdwy, rising by £128 to £524. Southern and Thames will be allowed to add a further £16 and £5 to bills respectively if their plans meet certain criteria with Ofwat.
Bills will rise for customers of all water companies in England and Wales, apart from those of Wessex Water and Sutton and East Surrey Water.
The Liberal Democrats’ environment spokesperson, Tim Farron, said: “Any insulting price hikes by water companies must be blocked. It is a national scandal that these disgraced firms are demanding more money from families and pensioners in a cost of living crisis, all while dumping raw sewage into our rivers.”
Mike Keil, the chief executive of the Consumer Council for Water, said: “Millions of people will feel upset and anxious at the prospect of these water bill rises and question the fairness of them, given some water companies’ track record of failure and poor service.”
Water companies have been criticised for asking customers to pay for a £96bn investment programme to stop raw sewage dumping, build new reservoirs and reduce leaks.
Campaigners for clean water argue that customers should not be paying for infrastructure investment that should have already been carried out to comply with companies’ operational permits.
Water companies, including Thames, have faced sustained criticism over leaky pipes, sewage dumping and extracted dividends.
The government said the environment secretary, Steve Reed, would meet water industry bosses on Thursday to “make clear that under this government water companies will be answerable for their performance”.
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Reed has written to them to ask for investment funding to be ringfenced, to put “customers and the environment at the heart of their objectives” and strengthen compensation rules when water supplies are interrupted. “We will never look the other way while water companies pump sewage into our rivers, lakes and seas,” he said.
The regulator said companies would invest £10bn to tackle storm overflows with a target to reduce spills by 44% from levels in 2021. A string of new environmental targets will be introduced, including tasking companies in England to spills to 16 incidents a year by 2029.
The price review is seen as crucial for the future of Thames Water, which is creaking under £15.2bn of debt. The company said this week that, after the review, it would approach potential investors this autumn, before Ofwat’s final verdict in December.
Ofwat said given Thames’ performance, it would impose a “turnaround oversight regime”, meaning the company must regularly report on the progress of its investment plan and provide a “financial resilience plan” after Thursday’s draft review.
In order to exit the regime, the company could be limited in the amount of debt it can take on, separate the business into two or more companies or list the business on the stock exchange to secure extra equity.
It revised an original £18.7bn spending plan submitted in October 2023 up to £19.8bn. Ofwat said on Thursday that it would be allowed to spend £16.9bn. Within that, more than £3bn is contingent on Thames proving it is “ready and able” to make the investments.
An important figure for water companies is the allowed rate of return, which has been set at 3.72%, below the 4.25% Thames had hoped for.
