An independent panel of experts appointed by the UK Competition and Markets Authority (CMA) has delivered its final redeterminations on water price controls for five water utilities that challenged decisions made by the regulator Ofwat. The ruling significantly limits the additional funding sought by the companies, rejecting the majority of the requested bill increases.
The dispute involved Anglian Water, Northumbrian Water, South East Water, Southern Water and Wessex Water. These utilities collectively serve around 14 million people and generate about £5 billion in annual revenue. The companies argued that Ofwat’s determinations for the 2025–2030 regulatory period did not provide sufficient resources to meet regulatory requirements, prompting them to request a review by the CMA.
The process comes amid broader debate about reforming the UK water sector and its regulatory framework. The Independent Water Commission concluded that the sector “requires fundamental reform on all sides”, while the UK government said the current system is “failing the environment, customers and investors”. However, the CMA panel was required by law to conduct the redetermination under the existing framework within 12 months, compared with the four years typically used by Ofwat for its price reviews.
In total, the five companies sought an additional £2.7 billion in revenue from customers. After examining submissions from the companies, the regulator and more than 50 stakeholders—including environmental organisations, consumer representatives and investors—the CMA panel concluded that only a small portion of that amount should be allowed.
The final decision authorises £463 million in additional revenue, equivalent to around 17% of the amount requested. This is lower than the £556 million proposed in the provisional redeterminations published in October. The CMA said the reduction is mainly due to market developments affecting financing costs since the provisional stage.
The approved funding is expected to translate into an average increase of about 2.2% in customer bills for the five companies. This comes in addition to the roughly 24% increase already incorporated into Ofwat’s price review.
Key elements of the CMA’s final redeterminations
- Approximately 83% of the extra revenue requested by the companies has been rejected.
- The permitted additional funding totals £463 million, lower than the provisional allowance due largely to changes in market conditions.
- Proposals for new projects and activities beyond those already approved by Ofwat were mostly declined.
- Some targeted funding has been granted to support improvements in service quality, pollution reduction and water supply resilience.
- A significant share of the approved revenue reflects higher financing costs compared with those assumed during Ofwat’s price review.
- The additional funding is linked to defined performance targets, and mechanisms are in place to recover funds if companies fail to deliver agreed projects.
Throughout the process, the panel said it sought to strike a balance between protecting customers from excessive bill increases and ensuring that water companies have the financial capacity to meet environmental and drinking water standards while attracting investment.
Kirstin Baker, Chair of the Independent Group, said: “We’ve rejected most of the bill increases water companies asked for but allowed limited extra funding where that’s genuinely needed, balancing concerns about affordability with the need to secure our water supplies and cut pollution. A significant part of this extra money reflects market movements since Ofwat’s decision.”
Implications for customers
Based on 2022–2023 price levels, the CMA’s final decision results in the following estimated average annual bills:
- Anglian Water: £602, compared with £649 requested and £591 under Ofwat’s determination (2% above Ofwat’s decision).
- Northumbrian Water: £488, compared with £515 requested and £488 under Ofwat’s determination (no overall change).
- South East Water: £284, compared with £322 requested and £274 under Ofwat’s determination (4% above Ofwat’s decision).
- Southern Water: £641, compared with £710 requested and £620 under Ofwat’s determination (3% above Ofwat’s decision).
- Wessex Water: £614, compared with £642 requested and £594 under Ofwat’s determination (3% above Ofwat’s decision).
The CMA has submitted its full determinations report to Ofwat. Under the statutory process, Ofwat and the UK government must complete a formal review before the full report is published.
