Thames Water plans to raise its bills by 11pc

Suzie Neuwirth
THAMES Water yesterday proposed an 11 per cent increase to water bills, despite regulator Ofwat rejecting its request for an eight per cent rise just last month.

All UK water firms had to submit a business plan for the 2015 to 2020 regulatory cycle to Ofwat yesterday, outlining proposed price increases and capital expenditure.

The London water supplier was the only firm to submit an above-inflation price increase to Ofwat, saying that the proposal was justified by plans to provide £2.8bn for investment in the Thames Tideway Tunnel.

The Macquarie-backed utility firm said it would need to raise bills by £8 above inflation from 2015 to 2020, to upgrade London’s sewer network that dates back to Victorian times.

Ofwat rejected Thames Water’s previous request to raise customers’ bills on the grounds that it was not justified.

In contrast, FTSE 100-listed United Utilities said it would be increasing bills by less than the inflation rate during the regulatory cycle, as did FTSE 250-listed Pennon, which owns South West Water. FTSE 100-quoted Severn Trent said it would raise bills by 1.2 per cent below inflation over the period.

“Ofwat has been very specific that increased bills have to be very well justified. Thames Water haven’t done themselves any favours with this proposed increase at a time when restraint is being called for,” Angelos Anastasiou, utilities analyst at Whitman Howard, told City A.M.

“But the listed companies were very much in line with what Ofwat was asking for. They’re moving in the right direction.”

Political pressure has been mounting on water companies to keep down prices, with environment secretary Owen Paterson calling for the industry to reconsider planned increases last month.

Ofwat resets price limits for each water company every five years, with the next review in 2014.

“Almost all companies are holding down their bills to keep them in line with or lower than inflation from 2015 to 2020,” said industry body Water UK. “In this next price review period, companies will continue their drive to be even more efficient, and will reduce returns to investors, to keep bills down.”