Cost of living: Southern Water and Portsmouth Water may increase prices under draft proposals - how much?

Proposals have been announced for Southern Water and Portsmouth Water to increase water bills over the next five years. Regulator Ofwat put together the draft plans, which would see Southern Water customers face a £183 increase over five years.

The bills are due to rise from £420 in 2024/2025 to £603 in 2029/30. Portsmouth Water customers will see their bills jump from £114 in 2024/2025 to £135 in 2029/2030.

Ofwat chief executive David Black said: “Customers want to see radical change in the way water companies care for the environment. Our draft decisions on company plans approve a tripling of investment to make sustained improvement to customer service and the environment at a fair price for customers. These proposals aim to deliver a 44 per cent reduction in spills from storm overflows compared to levels in 2021. We expect all companies to embrace innovation and go further and faster to reduce spills wherever possible.

“Today’s announcement also increases the resilience of our water supplies to the impact of climate change and will reduce how much water is taken from rivers by enabling a range of long-term water supply projects, which includes plans for nine reservoirs. Let me be very clear to water companies – we will be closely scrutinising the delivery of their plans and will hold them to account to deliver real improvements to the environment and for customers and on their investment programmes.”

A Water UK spokesman said the announcement was “the biggest ever cut in investment by Ofwat”. He added: “If it doesn’t put this right Ofwat will be repeating the mistakes of the past. As a direct result, more housing will be blocked, the recovery of our rivers will be slower and we will fail to deal with the water shortages we know are coming.

“Water companies proposed to invest £105 billion because it is the minimum needed to meet the legitimate concerns we’ve heard from the public about our environment and our economy. Ofwat is right to want to ensure customers receive value for money and that is why protections are in place to ensure customers only pay for projects that are new, necessary and value for money.

“But for far too long, Ofwat has failed to be realistic about the levels of investment needed and what it will take to deliver and maintain necessary infrastructure. We cannot allow this pattern to repeat itself. Water companies are ready to invest in an unprecedented overhaul of the country’s water and sewage infrastructure. Ofwat now needs to let them get on with it.”

Mike Keil, chief executive of the Consumer Council for Water (CCW), said millions across the UK will “feel upset and anxious” over the price hikes and will “question the fairness of them given some water companies’ track record of failure and poor service”. Southern Water was recently fined £330,000 after raw sewage escaped into a stream in Walthem Chase.

In 2021, the company was financially punished to the tune of £90m after untreated sewage was pumped Solent and Kent waters at 17 treatment sites. According to the Environment Agency, there were 3.6 million hours of spills last year in England – equal to about 400 years – compared with 1.75 million hours in 2022. Burst water mains have also been common, with Southern Water carrying out repairs across hundreds of metres of sewer underneath Eastern Road.

Mr Keil said: “Customers understand investment is urgently needed but they need reassurance that every pound of their money is going to be well spent. Trust in water companies has never been lower and that won’t change until people see and experience a difference – whether that’s having the confidence to swim at their favourite beach or receiving help if they are struggling to pay their bill. We estimate about two million households in England and Wales currently cannot afford their water bill and, while the increase in financial assistance is welcome, it falls short of what is needed.”

Mr Keil added that the CCW expect Ofwat to “listen and act on what customers tell us”. The proposals are part of the 2024 Price Review (PR24) and cover the period from 1 April 2025 to 31 March 2030, ahead of a final decision at the end of the year.

Ofwat said the average 21 per cent bill increase, around £19 per year, follows firms’ proposals to increase their total spending by £29 billion, split between a £5 billion increase in the core costs for running their business and a £24 billion rise in spending to meet requirements set by governments and for other environmental improvements.

Stuart Ledger, Southern Water’s chief financial officer, said: “Since submitting our business plan in October, we have continued to engage with stakeholders and customers, to feed into Ofwat’s process. We are now reviewing Ofwat’s Draft Determination, and we will publish our response on 28 August 2024, ahead of Ofwat’s Final Determination in December 2024.”

Southern Water said the price increases will be used to cut storm overflows, reduce leakage, put a stop to pollutions, and make sure water supplies are robust for years to come. They added that investment is key to raising environmental standards, and bills need to be gradually increased over the next five years to face challenges posed by rising costs, inflation, climate change, population growth and other issues.

In response to why the company is planning to increase bills by a larger rate then other companies, Southern Water said the average combined water and wastewater bill has increased by only £2 in the past 10 years in nominal terms, charging less than others. They added that drastically cutting storm overflows across coastlines will take time and a lot of money to tackle.

Portsmouth Water CEO Bob Taylor said: “We remain committed to delivering the very highest water supply standards and service in the sector at the lowest cost to our customers – providing targeted financial help to those who need the support.

“This is our most ambitious Business Plan to date, with a clear aim to increase capital investment by around 60 per cent to £347 million over five years. This is vital if we are to secure sustainable, long-term water resources for future generations. The plan also includes continuing our significant efforts to reduce leakage and supporting our customers to use water more efficiently through a universal smart metering programme starting from 2025. To maintain the very highest standards in water quality, we are also proposing investment to enhance several of our water production sites.

“We continue to be very conscious of the wider economic picture, and the pressures many of our customers are facing when it comes to their household budgets. We already have the lowest water bills in England and Wales, and plan to keep any price increases to a minimum. Our average bill of roughly £120 per year would increase by around £4 per year (excluding inflation) for the next five years, reaching an estimated £140 per year in 2030. We are pleased that our Business Plan has met Ofwat’s expectations, and we look forward to further dialogue in the coming months. We are also pleased to receive Ofwat’s continued support for our investment in Havant Thicket Reservoir.”