Thames Water, the UK’s largest water utility, has warned that it may not survive without a significant increase in water bills—nearly 60% over the next five years, reports BBC. The company’s demand comes in response to a proposed cap on water bill hikes by the industry regulator, Ofwat.
In July, Ofwat suggested a £19 annual limit on water bill increases, with a final decision expected in December. However, the water industry has argued that this cap is insufficient, claiming it could hinder necessary investments to address issues such as sewage spills.
Water companies have faced intense criticism in recent years over sewage discharges and leaks, with accusations that they have prioritized executive bonuses and shareholder dividends over essential infrastructure investment. This situation has led to a standoff between Ofwat and water companies regarding how much customers should be charged.
Thames Water, under scrutiny due to its £15.2 billion debt burden and limited cash reserves, has indicated that it only has enough funds to operate until May next year. Initially, the company requested a 44% bill increase for the period from 2025 to 2030, but Ofwat proposed a 23% rise instead.
On Wednesday, Thames Water announced its intention to seek a more substantial increase, potentially raising bills by as much as 59%. This increase would push the average annual water bill to £638 by 2030, compared to the current average of £443. The proposed hikes do not factor in inflation.
Chris Weston, Thames Water’s CEO, stated that the additional revenue from higher bills would be invested in new infrastructure and service improvements. He emphasized that customers are not being asked to pay twice but to cover for years of low bills.
“Over the last three regulatory periods we are forecast to spend over £2.7billion more than our allowances. Structural underfunding has led to significant asset health challenges alongside a substantial increase in the group’s leverage,” said Chris Weston in a recent press statement.
Weston argued that Ofwat’s current proposal of a 23% increase is insufficient, calling it "neither financeable nor investible" and warning that it would hinder the company’s recovery.
The call for higher bills follows a warning from Water UK, the industry body representing all water firms, that a larger increase is necessary to address leaks. David Henderson, CEO of Water UK, acknowledged public anger over sewage spills but pointed out that the country’s water system is outdated.
Henderson expressed concern that if Ofwat does not revise its proposal, investors might be reluctant to provide the needed funds. He rejected the notion that the lack of investment was due to high dividend payouts, arguing that returns are determined by Ofwat and necessary to attract investors.
David Henderson, Water UK Chief Executive, said: “Ofwat has a difficult job, but investors are telling us that they need Ofwat to change its approach. Unless the right conditions to invest are put in place, our environment and our economy will pay the price. We cannot delay upgrading and expanding vital infrastructure any longer, and Ofwat needs to reconsider its approach.”
An Ofwat spokesperson stated that the regulator would carefully review all responses to its proposals, with submissions expected from various stakeholders, including water companies, customers, environmental groups, and investors. These responses are anticipated to present a wide range of views on the proposed bill increases.
