Water bills have risen by 36% after an Ofwat inspection

Open the Editor’s Digest for free

Roula Khalaf, Editor of the FT, picks her favorite stories in this week’s newsletter.

UK water regulator Ofwat will allow agencies in England and Wales to raise customer bills by around 36 per cent by 2030, a bigger increase than previously stated, but still short of the hike requested by troubled companies such as Thames Water.

Ofwat he announced that the bill would add in “final determination” to the tough measures and measures to govern Britain’s privately-owned water companies for the next five years.

“Water companies now have to deal with this problem, customers will expect them to ensure they can improve over time to ensure higher bills,” said David Black, chief executive of Ofwat.

The manager also paid a fine Thames water £18mn after finding that the company’s payroll last year breached its rules.

The bill rise is higher than the 21% increase Ofwat indicated it would allow earlier this year. Water supporters had asked for a 44 percent increase.

The increase means bills will rise by around £31 a year before inflation between now and 2030.

Thames Water will be allowed to raise bills by 35 per cent, much lower than the 53 per cent rise demanded by creditors.

However, bills may be higher than they will be in the future for Thames Water and Southern Water, whose costs have been increasing. will be reviewed. Ofwat said annual bills could rise by £11 and £20 respectively for the two devices, pending “clarity over the timing and history of these companies’ plans”.

Water companies are locked in talks with Ofwat on how to raise debt between 2025 and 2030. The companies have pushed for a bigger increase, saying they need to pay for the cost of the damage.

It is the first time in 15 years that Ofwat has ruled in favor of allowing water companies to raise actual bill prices, cutting costs for customers ahead of the last two years of the five-year rate hike.

Since going public in 1989, water companies have been required to settle with regulators every five years and increase bills, the amount of money they can invest and the amount of money their suppliers can make.

Thames Water’s long-running problems threaten to drive investors away from the company, raising Ofwat’s costs. Thames Water, the UK’s biggest water company, has warned that the controversial decision will undermine its efforts to raise new capital from investors.

Problems with the UK’s water industry and the pollution of rivers and coastal areas have also sparked public anger.

Steve Reed, the environment secretary, said people were “right to be angry” about the state of the waterworks and criticized the former Conservative government.

“They recklessly allow water companies to siphon off customers’ money to line the pockets of their bosses and shareholders,” he said.

A Labor government could “block the money that is being invested so that it can’t be converted to pay for the bonuses and salaries that they have,” Reed added.

Compared to its July filing, Ofwat significantly raised the rate of return allowed for water use from 3.72% to 4.03%, which it said reflected “recent market trends”.

Although Ofwat published details of its final decision on Thursday, it could take days for water companies and their legal and advisory teams to fully resolve the remaining regulatory and permitting issues.

“The devil is in the details,” said one Thames Water employee.

Water companies can also challenge Ofwat’s final decision with the Competition and Markets Authority. They have two months to present their case to the CMA, and any challenges are expected to take up to six months to resolve.

A $3bn emergency loan that Thames Water is in the process of obtain the permission of the court for he could give it money to the CMA problem, with half of the money released only if it takes its case to the regulatory competition.

Four companies – Bristol Water, Northumbrian Water, Anglian Water and Yorkshire Water – appealed to the CMA against Ofwat’s tariff determination in 2019 and won their case. Their appeal to race directors has been enormous since their inception thirty years ago.