Average water bills to rise by 36% over next five years

(Sharecast News) - Average water bills are to rise by over a third in the next five years, the UK regulator confirmed on Thursday. Announcing its final determination for the five year period to 2030, Ofwat said average bills would increase by 36% in England and Wales, the equivalent of around £31 per year.

The amount is higher that the 21% Ofwat initially proposed but below the water companies' request for an average rise of 40%. They insisted a larger hike was needed to fund investment in aging infrastructure.

Criticism of water companies has become increasingly vocal in recent years. Many stand accused of repeated leaks and sewage spills, polluting rivers and the sea and failing to invest.

They have also been criticised for continuing to pay out executive bonuses and dividends despite poor service records.

The exact amount bills will rise will vary from utility to utility.

Crisis-hit Thames Water, which is at risk of being renationalised, has been permitted to hike bills by 35%, far lower than the 53% increase it was seeking. Thames Water was also hit on Thursday by a £18.2m fine, after Ofwat found its dividend payments last year breached its licence conditions.

Water companies, which were privatised in 1989, are required to reach settlements every five years with Ofwat. The agreements cover bill increases, the amount they can invest and the returns investors can make.

Under this determination, as well as bills going up, Ofwat said it had approved "substantial improvements" for both customers and the environment through a £104bn upgrade.

Chief executive David Black said: "Today marks a significant moment. It provides water companies with the opportunity to regain customers' trust by using this £104bn upgrade to turn around their environmental record and improve services to customers.

"Water companies now need to rise to this challenge. Customers will rightly expect them to show they can deliver significant improvement over time to justify the increase in bills."

Blue chip United Utilities Group, which has been allowed to increase bills by 32%, less than the 36% it requested, said: "The final determination is a detailed publication that will take time to review thoroughly, and we have until 18 February to respond."

Two of the biggest rises will be paid by customers of Southern Water and Severn Trent Water. Southern, which had sought an 83% hike, was awarded 53% increase, while Severn Trent has approval to lift bills by 47%.