Water bills set to increase despite damning report over pricing

Water bills are to increase by an average of £2 across England and Wales over the next year, despite a recent damning report that found households have been paying too much for their supply.

The average household water and sewerage bill will reach £389 - an increase of £2 or "less than 1%" compared with the previous year, Water UK said.

Regulator Ofwat, which drew harsh criticism from the Public Accounts Committee (PAC) last month for consistently overestimating companies' costs when setting price limits - leading to higher bills for customers, said the announcement was in line with its "tough 2014 price review".

Water UK said the increase would help water companies invest £44 billion over five years in better services, greater resilience and environmental improvements.

Water UK chief executive Michael Roberts said: "For just over £1 a day, households across the country can have access to high quality water services day and night.

"Water companies understand the pressures on customers' pockets and are committed to keeping household bills as low as possible while still investing in vital improvements.

"Through continued efficiency improvements, the water industry is set to lower prices for households by 5% on average in real terms between 2015 and 2020."

Ofwat chief executive Cathryn Ross said: "We challenged companies to listen and respond to their customers' priorities. Where they didn't step up, we stepped in.

"Our challenge led to an additional £3 billion of savings for customers. As well as keeping bills down, we also pushed companies do to even more to improve service.

"Companies will only build trust and confidence with their customers if they deliver. They need to be clear and open about how they are performing. Those who deliver can expect fair returns, while those who fail to meet their customers' expectations will be hit in the pocket."

Last month, the PAC said many householders would be "appalled" to learn that their water bills - which averaged £396 last year - could have been smaller if Ofwat had adopted a different approach to setting limits to the amount companies can charge customers.

The committee of MPs said Ofwat, which was set up to protect the interests of consumers - many of whom have no choice over who supplies their water, had consistently overestimated companies' financing and tax costs when setting price limits.

As a result, companies made windfall gains of at least £1.2 billion between 2010 and 2015 from bills being higher than necessary.

Consumer Council for Water chief executive Tony Smith said: "We are pleased that the rise in bills for 2016-17 is less than 1%, but it is still an increase.

"Affordability is still a concern for many low-income households who are already struggling to pay. Our research shows that one in eight customers in England and Wales are already finding it difficult to afford their water bill."