Water firms must slash the average bill by £50 by 2025, regulator Ofwat insisted today as it set out plans to improve the utility providers’ performance.
The demand forms part of a massive £51bn investment strategy for water companies under Ofwat, including a goal to cut the amount of water lost to leaks by 16 per cent.
“Water companies need to crack on, turn this into a reality and transform their performance for everyone,” Ofwat chief executive Rachel Fletcher said.
Ofwat will implement the new plan in April 2020, as it seeks to reduce pollution incidents by 30 per cent and get water firms to set aside over £1bn to deal with flooding.
Under the plans, average bills would drop by 12 per cent before inflation.
Northumbrian have been tasked cutting its average bill by over a quarter, from £429 to £319 in 2024-5, whilst Hafren Dyfrdwy, Severn Trent’s Welsh subsidiary, must only reduced bills by three per cent.
Speaking to City A.M., Ofwat director David Black, who headed up the price review process, described the plans as “readily achievable.”
He added that the challenge for utility providers would likely be in improving their services packages.
The regulator shocked the industry in July by rejecting all but three water providers’ business plans for 2020-25.
Yorkshire, Anglian, Northumbrian, Southern and Thames Water are thought to be facing the worst of the fallout from the decision.
Although they are all expected to complain to the Competition and Markets Authority, the response has been reserved so far, with companies keen to stress the strides they have already made.
Peter Simpson, chief executive of Anglian Water said: “We are confident about the plan submitted and worked very closely with our customers and stakeholders, to ensure that our programme of work up to 2025 was going to deliver the right outcomes for our customers, our region, and our environment.”
Industry trade body boss Christine McGourty said:
“Today’s announcement is a highly important one as the industry looks to deliver for customers and for the environment, today and in the future.
“Companies will now take time to work through all the details as they consider the implications of this tough price review for the years ahead.”
In draft determinations that Ofwat has today approved, the regulator demanded water firms pay debts faster become more efficient and treat customers better.
£5bn of the investment will go towards a national environment programme aimed at improving the health of the UK’s rivers and its water quality.
Tony Smith, chief executive of the Consumer Council for Water, said: “Most customers will see this as a good deal but more must be done to make sure everyone can afford their bill and ensure there is sufficient investment in safeguarding these essential services long into the future.
“Water companies have had it too good for too long. At first glance it appears Ofwat has listened to our repeated calls for it to get tougher and tip the balance back in favour of customers. But we’ll be keeping a close eye on the performance of companies to make sure customers are not short-changed.”