Water firms will be made to cut customer bills by an average of £50 and invest an extra £6 million every day over the next five years under plans unveiled today by industry regulator Ofwat.
In the "most far-reaching" price review it's ever undertaken, the regulator will see £12 billion invested over and above the usual costs and business spend.
It said firms had to provide better services and increased investment at the same time as cutting water bills.
Other new targets set under the review include cutting pollution incidents by more than a third, reducing supply interruptions by almost two-thirds, helping 1.5 million customers who are struggling to pay and reducing leaks.
Ofwat chief executive Rachel Fletcher said:“The package we are unveiling today signals a brighter future for customers, with better services, a healthier natural environment and lower bills.
“To get there we are calling for extra investment of £6 million each and every day to improve the environment and provide services for a growing population. At the same time we expect to see customers’ bills cut by an average of £50.
“These are seriously stretching goals for the sector, but we know they can be achieved. We have seen three water companies leading the way and we now want the rest to show the ambition and drive to deliver this new era for customers and the environment.”
The service improvements Ofwat is demanding include:
- Cutting pollution incidents by more than a third
- Reducing supply interruptions by almost two-thirds
- Helping 1.5 million customers who are struggling to pay, and
- Cutting leakage to save enough water equivalent to the needs of the population of Manchester, Leeds, Leicester and Cardiff
"Extreme weather events, climate change and population growth mean that water companies need to make sure they are doing everything they can now, so that they continue to provide safe and reliable water and wastewater services whatever the future brings," the regulator said in a statement.
Tony Smith, chief executive of the Consumer Council for Water, said: "It's good news that most customers will see their bills fall even after inflation and that Ofwat has responded positively to our long-standing challenge to be much tougher on companies' financing costs and performance."
But he added: "Not everyone will see their bills fall when you add inflation and customers need to be told how much Ofwat's financial rewards for companies could hit them in the pocket.
"Only about half of the 3 million households who struggle to afford their water bills will receive financial assistance under these plans, so more companies should use their own profits to boost this support and not rely on the goodwill of other customers to fund these schemes."
The announcement covers 14 of the 17 water companies in England and Wales.
The remaining three - Severn Trent, South West Water and United Utilities - have been fast-tracked through this stage of the price review after submitting plans of their own that set out price caps and service improvements in the next five years.
Water companies have the chance to offer new evidence if they think Ofwat’s plan will stop them delivering for customers and the environment.
Ofwat said it would "consider carefully" responses before making final ruling in December.
Environment Agency Deputy Director for Water Anne Dacey said:“Water companies are custodians of the environment.
"We expect them to deliver on the promised £4.6bn investment to protect and enhance rivers and beaches, as well as redouble their efforts to reduce pollution, protect more properties from sewer flooding and increase resilience to drought.“
Whilst we are pleased with this ambition, and the plans do broadly include our recommendations for environmental improvements, we will review the finer detail before challenging the companies on any further changes needed.”
