Water Companies Agree to Cut Bills

Several water companies in England and Wales have announced cuts to household bills in plans submitted to the industry regulator, Ofwat.

According to the report summary by Water UK, the industry’s lobby group, the nine major providers will undertake to reduce the average household bill by more 4%, with the largest cut made by United Utilities, promising 10.5% off, and South West Water, with 10%.  Severn Trent and Welsh Water have also announced a price cut of 5%, although the former’s Welsh branch would only see a cut of 2.2%.  The average impact on a consumer’s wallet will be a reduction of between £15 and £25 a year for bills, with the luckiest having theirs reduced by up to £45.  This will reverse the trend of the last few decades – since the privatisation of water companies in 1989, prices have gone up by around 40%.

Thames Water has announced a price freeze, with no price cut, over the next five years but has promised a fund of £2.1 billion to “boost resilience and reduce leakage”, to combat its increasing wastage – it was fined £120 million by the regulator this summer for leakages and similar issues.

Aside from pushing customer savings, Ofwat has tightened up regulations for other aspects of the water industry, including divided policies, executive pay, debt-to-equity ratio and other issues.  John Russell, senior director at Ofwat, said: “We’ve reached a key milestone in our price review process.  From now until January 2019, we’ll pore over each and every business plan and we’ll be looking for evidence that they are robust, ambitious and, crucially, that they have been shaped by customers.”

Not all companies have been able to cut bills.  Anglian Water, for instance, has announced a price rise of 1% - although the firm has also pointed out that its catchment areas only receive 2/3rds of the national average rainfall.  In general, companies are funding such price reductions by announcing massive cost-cutting measures, whether that be by reducing leakage or laying off staff, leading to fears that some customers will experience an inadequate maintenance service, and a reduction in companies’ abilities to respond to water emergencies.

Tony Smith, chief executive of the customer body Consumer Council for Water, called the new plan “a key opportunity for water companies to restore consume trust by proving to their customers that they’re taking positive and decisive action.”

Some companies have looked at alternative methods of providing savings for customers without jeopardising profits.  South West Water has proposed to Ofwat that customers have a stake in their business and powers to hold the company to account, in order to “deliver a new deal in which you will have a chance to influence the future direction of the business and share in its success.”

Analysts have welcomed the move, but pointed out that impactful savings are unlikely to be handed to customers by firms, and that the public should be more savvy in its water dealings, including installing water meters and cutting down on usage.

Ben Rich

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