(qlmbusinessnews.com Thurs. 29th Aug, 2024) London, UK —
Water Bills Set to Rise by 60%? Thames Water Issues Urgent Warning
Thames Water has issued a stark warning that it will not be able to survive unless it is allowed to increase water bills by almost 60% over the next five years. The UK’s largest water company made this demand in response to a proposed cap by the regulator, Ofwat, on the amount water bills can rise.
In July, Ofwat proposed an average annual limit of £19 on water bill increases, with a final decision expected in December. However, the water industry argues that this proposed cap is insufficient to secure the necessary investment to address issues like sewage spills and infrastructure leaks. Water companies have faced intense criticism in recent years over repeated sewage discharges and leaks, with many claiming they have prioritised executive bonuses and shareholder dividends over essential investment.
Thames Water is currently under scrutiny, grappling with a £15.2 billion debt and facing questions about its financial viability. The company has sufficient cash to maintain operations only until the end of May next year. Initially, Thames Water requested a 44% increase in bills for the period from 2025 to 2030, but Ofwat proposed a more modest 23% rise. Now, the company has announced it is seeking a steeper 59% increase, which would see average annual water bills reach £638 per customer by 2030, up from the current average of £443. This proposed rise does not account for inflation.
Chris Weston, Thames Water’s Chief Executive, stated that the extra revenue from higher bills would be invested in upgrading infrastructure and improving customer services. He argued that customers are not being asked to pay twice, but rather to compensate for years of keeping bills low. Weston further claimed that Ofwat's proposal of a 23% increase was “neither financeable nor investible” and warned it would hinder the company’s recovery and turnaround efforts.
David Henderson, Chief Executive of Water UK, the body representing the water industry, echoed concerns about the sufficiency of Ofwat's proposal. He noted that while public anger over sewage spills was justified, the country’s water infrastructure is “tired and old.” Henderson warned that if the regulator does not revise its proposal, investors may not provide the funds necessary to upgrade the system. He dismissed the suggestion that recent dividend payments to investors were the cause of the investment shortfall, insisting that returns are set by Ofwat.
However, the GMB union sharply criticised the water companies' stance, calling their claims “absolute balderdash.” Gary Carter, the union's national officer, argued that water companies have had the funds but failed to invest adequately in preventing leaks and sewage spills.
An Ofwat spokesperson said that the regulator would carefully consider all responses to its draft proposals, which are due by midday on Wednesday. The spokesperson emphasised that the consultation would reflect a broad range of opinions from water companies, consumers, environmental groups, and investors.
The issue of sewage spills has intensified in recent months, with incidents more than doubling last year. An investigation by a reporter earlier this year revealed that England's water companies potentially released sewage illegally 6,000 times in 2022, breaching their permits. Thames Water, along with Yorkshire Water and Northumbrian Water, are facing fines totalling £168 million for failing to address leaks over several years. In response, Ofwat has suggested implementing a ban on director bonuses until these issues are resolved.
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