Regulator Takes Action on Debt-Ridden Thames Water
Ofwat has approved water companies in England and Wales to increase prices for consumers by an average of £19 a year over the next five years.
Regulators have placed debt-ridden Thames Water into special measures and denied the company’s request for a 44% increase in consumers’ water bills over the next five years.
Given concerns about Thames Water’s performance, Ofwat will implement a “Turnaround Oversight Regime,” requiring the company to provide a “delivery action plan” outlining strategies to improve performance in addressing leaks and sewage spills.
Additionally, the company must submit a “financial resilience plan,” with ongoing monitoring of its financial status, potentially involving an independent monitor to track progress.
Thames Water’s proposal to hike consumer bills by 44% (£191) by 2030 was rejected, with a counterproposal for a 23% increase (£99) over the same period. This would raise average bills from £436 per year in 2024–25 to £535 in 2029–30.
Thames Water, the UK’s largest water company serving 16 million customers across London and the Thames Valley, is facing a debt of over £15 billion. The company stated it can only operate until May 2025.
A spokesperson for Thames Water noted that Ofwat’s draft ruling challenges them on efficiency and delivery, and they will review the regulator’s proposals.
Related Stories
A negotiation period will ensue until Ofwat’s final decision is reached in December. Historically, major alterations between draft and final rulings by the regulator have been rare, suggesting Thursday’s plans are likely to remain mostly intact.
Pollution Scandal
Due to a nationwide pollution scandal in recent years, the UK has exposed water companies for poor environmental practices, including Thames Water’s discharge of raw sewage into water bodies.
In England last year, sewage spills into rivers and seas more than doubled, with 3.6 million hours of spills in 2023 compared to 1.75 million hours the previous year, as reported by the Environment Agency.
Following Ofwat’s ruling release, Environment Secretary Steve Reed urged the regulator to safeguard water companies’ funding for critical infrastructure investments. This ringfencing would ensure expenditures are directed towards upgrades benefiting customers and the environment.
Mr. Reed remarked, “This unacceptable ecological harm should never have occurred, but steps have now been taken to prevent its recurrence.”
Ofwat has outlined plans for the other 15 water companies in England and Wales to sustain improvements in customer service and environmental impact at a reasonable cost to customers.
Chief Executive David Black of the regulator stated, “These propositions aim to achieve a 44% reduction in spills from storm overflows compared to 2021 levels. We expect all companies to embrace innovation and enhance efforts to reduce spills wherever feasible.”
“Let me be very clear to water companies — we will closely scrutinize the implementation of their plans and will hold them accountable for delivering genuine environmental and customer improvements, as well as on their investment schemes,” added Mr. Black.
Rising Water Bills
Thames Water wasn’t the only firm granted permission to raise water rates over the next five years, though at a reduced amount compared to their request.
Per the draft proposals, Ofwat agreed to an average £19 annual increase in water bills in England and Wales over the next five years, one-third less than requested by utility companies. For instance, Severn Trent’s proposed £144 increase to 2030 was reduced to £93.
There are significant variations in price rises regionally. Southern Water will see a £183 increase over five years, while Yorkshire Water customers face a £107 hike. Affinity customers in outer London and home counties will have an £11 rise, whereas SES consumers in Surrey, Kent, and south London are expected to save an average of £34 from the previous five years.
Chancellor of the Exchequer Rachel Reeves labeled the 21% average rise in water bills as a “bitter pill” for customers amidst sewage and water management challenges.
Ms. Reeves affirmed that the new Labour government will address issues in the water sector, stating, “It’s clearly a bitter pill for people who are seeing today’s announcements about higher water bills.”
She added, “This reflects 14 years of failure from the Conservatives to drive investment to reduce pollution and ensure that families don’t suffer as they have in the cost-of-living crisis.”
PA Media contributed to this report.
