A proposed average 21% hike in bills in England and Wales won’t be enough to address problems including sewage leaks, water firms have warned.
The firms are in a standoff with regulator Ofwat over proposed bill rises.
Ofwat has said it wants firms to limit rises to an average of £19 per year until 2030.
But water companies hit back, saying the regulator had “got this wrong” and warned the bill rises wouldn’t be enough to “deal with the water shortages we know are coming”.
Although the proposed average rise will put more pressure on households, it is a third less than the amount requested by water companies.
The bill hike is intended to fund investment for improvements such as replacing leaking pipes and reducing sewage discharges into rivers and seas.
It comes as suppliers face increasing scrutiny over their environmental and financial performance over the past years, as well as anger over executive pay.
The bill hike varies by region, with Thames Water customers facing an increase of £99 or 23% over the next five years, Anglian customers looking at £66 or 13%, and Southern Water customers facing £183, an increase of 44%.
But this is less than firms had been requesting. For example, Thames Water’s proposed increase of £191 by 2030 was reduced to £99, while Severn Trent’s proposed increase of £144 was lowered to £93.
The proposed bill rises can be challenged by the water firms, with a final determination due at the end of the year, and increases set to take place from April.
David Henderson, chief executive of industry group Water UK, told BBC business editor Simon Jack: “We think they’ve [Ofwat] got this wrong.”
“This is an unrealistic and unfair decision from Ofwat and our economy and environment will pay the price,” he added.
A spokesperson for the lobby group said the proposed plans were “the biggest ever cut in investment”.
“As a direct result, more housing will be blocked, the recovery of our rivers will be slower and we will fail to deal with the water shortages we know are coming,” the spokesperson said.
Labour has pledged a crackdown on the industry, promising consumers higher compensation for sewage failures and the power to hold executives to account.
It plans to introduce new measures to ensure that money earmarked for investment and improvements cannot be diverted to pay salaries or dividends.
The new Secretary of State for Environment Food and Rural Affairs, Steve Reed, spoke to water company bosses on Thursday and afterwards said the meeting had “gone well”.
“I’m delighted that the water companies have agreed to my initial measures to clean up our waterways, including ring-fencing investment which is intended and will be spent on fixing the sewage system and getting the pollution out of our water,” he said.
Mr Reed rejected nationalising any of the water companies, saying: “I want to get to work quickly to clean up the unacceptable levels of pollution that are so outraging the public. Nationalisation would slow that down and cost money we do not have.”
The Consumer Council for Water, an arms-length government body funded by a levy on people’s water bills, estimated that “about two million households in England and Wales currently cannot afford their water bill”.
It said an increase in assistance for struggling households was welcome but “falls short of what is needed”.
“Customers understand investment is urgently needed but they need reassurance that every pound of their money is going to be well spent,” said chief executive Mike Keil, adding that “trust in water companies has never been lower”.
The UK’s biggest water firm, Thames Water, is being put under fresh scrutiny by Ofwat, with a new “oversight regime” to make sure the company improves its performance.
The struggling debt-laden firm said this week that it had enough cash to fund its operations until the end of May next year and that efforts to raise new money are continuing.
Ofwat said Thames Water must provide a “delivery action plan” and regularly report on progress, assessed by a third party.
Thames Water is at risk of having the credit rating of its debts downgraded by S&P Global, the ratings agency said on Thursday, which would increase the interest rate it would have to pay to borrow cash.
Labour’s crackdown on the water industry includes introducing customer panels that will have powers to hold directors and executives to account while compensation for customers for failures to hit required standards could be more than doubled.
It comes at a time of rising consumer anger at pollution but also at a time when some companies – including heavily indebted Thames Water – have asked for leniency due to financial distress.
Water firms have been under fire for paying out tens of billions of pounds in dividends to shareholders but failing to invest.
According to Ofwat, since privatisation 30 years ago, firms have paid out £53bn in dividends, but have also invested more than £200bn in infrastructure.
In 2023, sewage spills into England’s rivers and seas more than doubled.
According to the Environment Agency, there were 3.6 million hours of spills, compared to 1.75 million hours in 2022.
Dave Wallace is a citizen scientist who has been testing the water in the River Thames where he lives in Henley after some children got ill last year.
“I’d been swimming and found myself swimming in what I’d describe as solids and started wondering what on earth is going on.
“We’ve actually found high levels of pollution and found very high levels of E. coli on the river.”
He said he’s now stopped swimming in the river after reports of an increase in sickness and diarrhoea, as well as people getting infected sores and contracting sepsis.
“It’s not just people but dogs as well. There’s lots of reports of dogs getting ill from going in the water,” he said.
