Britain’s water regulator said it would allow bills to rise by just over a third in the next five years to fund a higher level of investment than originally planned, with the aim of fixing the country’s broken water sector.
The average increase of 36% before inflation, equivalent to a 31 pound ($39.18) a year increase over five years, compares to the 44% average requested by companies and the 21% the regulator had proposed in July.
The pumping of raw sewage into rivers and seas has become a major scandal in Britain, with privatised water companies accused of prioritising dividends over investment, leaving the infrastructure to degrade.
The sector has blamed the regulator for wanting to keep bills low and the industry, saddled with tens of billions of pounds of debt, is now under pressure to fund an overhaul of pipes and treatment plants.
Environmental groups, however, have questioned whether the companies can be trusted to spend the extra money to stop sewage spills after repeated failures over the years.
Thames Water, the country’s biggest supplier, is at risk of nationalisation.
Ofwat, the regulator, said on Thursday that the bill increases would lead to a 104 billion pound ($131 billion) upgrade to cut sewage spills. It said a claw back mechanism would mean any money not spent on investment would be returned to customers.
Under the final plan, none of the companies will receive bill rises as high as they had asked for. Thames Water, which had argued for a 53% increase, will be allowed to hike bills by 35%. Southern Water which had demanded the highest increase, at 83%, will increase bills by 53%.
It remains to be seen whether the rise is enough to help boost stricken Thames Water’s chances of survival, which depends on it attracting over 3 billion pounds of new equity.
Thames said it will “take time to review the determination in detail before making its response”, while another operator, Pennon, said it was also reviewing the implications.
Should any of the water companies oppose Ofwat’s final determination they have until Feb. 18 to appeal to the competition regulator.
