Future Water Prices – bill reductions before inflation over 2015-20
Every five years Ofwat, the economic regulator for the water and sewerage industry, sets price limits that enable water and sewerage companies to finance the delivery of services to customers, in line with relevant standards and requirements. Ofwat sets separate retail and wholesale price controls for each water company.
The current review of prices has been a lengthy and complex process which culminated in the publication of price limits for each water company that will take effect from 1 April 2015.
Ofwat has confirmed that the average household water and sewerage bill in England and Wales will fall by around 5 per cent from £396 in 2014/15 to £376 by 2020, before inflation is added.
How the average annual bill for each water company will change over the 2015-20 period
Average water and wastewater bill for the water and sewerage companies:
Average bill for the water only companies:
The price decision by Ofwat represents a significant victory for the voice of the customer because customers’ views have shaped water pricing more than ever before. Most water companies and Ofwat have listened to customers and delivered a deal which reflects the services they want, at a price most find acceptable. Extensive customer research was undertaken over the last two years to understand customers’ expectations of the service they receive from water companies, and their investment, service and price proposals were developed from this ‘customer evidence’. Company and Ofwat proposals for price and service improvements were then ‘tested’ through market research to ensure the majority of customers found the price and investment ‘package’ acceptable and affordable.
Water company investment proposals were also scrutinized and challenged by Customer Challenge Groups, set up by Ofwat for this Price Review in response to CCWater’s calls for more customer involvement in the price setting process. CCWater played an active role in all of these groups, to ensure the customers’ voice was heard and acted upon, right through the price setting process.
How inflation will effect bills
While bills are coming down in real terms, customers need to be aware that water companies are allowed to add inflation to bills each year which means charges are still likely to rise from what they are now. That will hurt some households. Support exists for customers who are struggling to pay, and CCWater will be pressing every water company to ensure these schemes reach those who need help.
CCWater will also keep a close eye on every water company’s performance to ensure they deliver on the commitments they’ve made to customers to improve service through the investments companies are making through the 2015-20 period.
Thames Water and the Thames Tideway Tunnel project
CCWater is concerned that it remains unclear what impact the Thames Tideway Tunnel will have on the bills of Thames Water customers during 2015-20.
Although Thames Water’s average bill will fall by 5 per cent before inflation is added, this does not include the full cost of the Tunnel project which has yet to be finalised . One in five water customers already tell us their water bill is not affordable so the cost of the Tunnel may yet prove a tipping point for those already struggling to pay.
CCWater will update this page once the cost of the Tunnel project is finalised later in 2015, and the future bill impact for customers is known.
If you have any questions please contact either: Steve Hobbs, Senior Policy Manager, Regulation (firstname.lastname@example.org) or; James Mackenzie, Policy Manager, PR14 (email@example.com)