Water firms told to cut bills by 5%

Most firms agree, but some want to hike bills further

Updated: 
A kitchen faucet with water running out of it.

Britain's water companies have been told by the industry regulator to cut household bills in real terms by 5% over the next five years.

Ofwat said the decision - which confirms a provisional determination in August - would see national average bills for water and sewerage services in England and Wales fall from £396 to £376.

When the process for setting bills began last year, water companies had submitted plans which would on average have cut bills by 2% in real terms.

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Ofwat rejected a request by Britain's biggest water company, Thames Water, to increase household charges by 3% over 2015-20 to help pay for the £4.2 billion Thames Tideway Tunnel. It has been told it must instead cut them by 5%.

Improve service

It also said utility firms must improve efforts to tackle water leakage, supply interruptions, sewerage water flooding of properties and see cleaner water at beaches.

Ofwat chief executive Cathryn Ross said: "With bills held down by 5% and service driven up over the next five years, customers will get more and pay less.

"Where companies stepped up to do the best they could for their customers we did not need to intervene, but where companies fell short we stepped in to make sure customers get a good deal.

"Now the hard work begins. Companies will only build trust and confidence with their customers if they deliver.

"Those who do can look forward to fair returns, while those that don't will be hit in the pocket and face a tough five years ahead."

Thames wants to hike bills

Most firms had already said they would cut bills in real terms over 2015 to 2020.

But Thames had asked to be able to raise bills by an average of £8 each year. It serves around 14 million customers in and around London.

It was one of three water companies told in August that its plans for bills over the period fell well short of Ofwat's provisional expectations. The others were Bristol Water and United Utilities.

United, which had asked last December to keep bills flat in real terms, was told to cut them by 3%. Bristol Water - which is a water supplier only and not a sewerage firm - had asked to put bills up by 1% but was instead told to cut them by 21%.

Anglian to cut bills by 10%

All 18 companies were told to cut bills in real terms. They include 10, such as Thames and United, which supply both water and sewerage services.

Anglian was told to cut bills by 10%, Welsh Water Dwr Cymru by 5%, Northumbrian (including Essex and Suffolk) by 1%, Severn Trent by 5%, Southern by 8%, South West by 7%, Wessex by 9% and Yorkshire by 3%.

New charges will come into effect in April 2015. Ofwat said companies have two months in which to accept its final determination or seek a referral to the Competition and Markets Authority.

The regulator also said the plans would see improved levels of service with companies set to spend more than £44 billion or around £2,000 for every household in England and Wales over the next five years.

It said improvements would include more than 370 million litres a day saved by tackling leakage and promoting water efficiency - enough water to serve all the homes in Birmingham, Manchester and Leeds.

Maintain customer trust

Ofwat also said there would be a reduction in the time lost to supply interruptions of 32% on average, while 4,700 fewer properties would be flooded by sewer water and there would be cleaner water at more than 50 beaches.

The regulator's chairman, Jonson Cox, said: "This is an important step in maintaining customers' trust and confidence in the water sector.

"We set out to deliver a challenging but fair outcome. We are requiring companies to meet higher service standards and deliver on their promises to customers.

"We are bringing down bills so customers can expect value for money, while investors can earn a fair return.

"Companies will need to stretch themselves to deliver much more with the same level of funding as in previous years. We will achieve more resilient infrastructure and better service as a result."

'Fair deal for customers'

Environment Secretary Elizabeth Truss said: "We are committed to seeing a fair deal for customers. This decision will see people's average water bills fall by around 5% in today's money over the next five years, helping to keep bills affordable.

"Ofwat's decision also means continued investment in vital infrastructure, delivering both value for money for customers and environmental improvements. This shows the system of regulation we've put in place is working."

But shadow environment secretary Maria Eagle said: "For many people prices are still going to be rising faster than wages and that's why one in five people are struggling with their water bills.

"Water companies are allowed to add inflation to these prices and for most people that will put their bills up. The truth is that the water industry isn't working for consumers and David Cameron has done nothing to address it."

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