Water and sewerage bills to increase

05 February 2013

Average bill to rise by 0.5% above inflation to £388 - £25 billion investment programme over five year period

The average household water and sewerage bill in England and Wales is forecast to increase by 3.5%, or about £13. This takes into account a rate of inflation of 3%1, and will mean an average bill of £388 in 2013/14.

In 2009 Ofwat made its decision on how much water and sewerage companies could charge customers between 2010 –15. The regulator′s challenge of companies′ proposals means that across England and Wales average bills have remained broadly in line with inflation. And bills are ten per cent lower than what companies asked for.

This is before inflation is factored in. The rate of inflation is added to bills on a year-by-year basis. Since 2009/10, the average bill has risen slightly below (by 0.7%) the rate of inflation.

Regina Finn, Ofwat Chief Executive Officer said:

“Customers can’t choose their supplier. It’s our job to make sure they are protected. Back in 2009, companies wanted bills rises of 10 per cent above inflation. That didn’t chime with what customers told us they wanted, so we said they could only increase bills in-line with inflation.

“We understand that there is huge pressure on household incomes, and any rise is unwelcome. Inflation is driving these increases.

“These rises will help pay for investment of around £1000 for every household in England and Wales. This will deliver real benefits - from continuing to improve the reliability of supplies to dealing with the misery of sewer flooding for thousands of customers.

“We will make sure customers get value for money, and if companies fall short in delivering their investment promises, we will take action. In the past seven years, we have made companies pay out around £550 million where they have underperformed.”

The bill changes for this year will come into effect on 1 April 2013 and apply until 31 March 2014. The impact of the new charges will vary for individual household customers depending on the company that supplies them and whether or not they have a water meter.

Customers’ bills are helping pay for an investment programme worth around £25 billion between 2010 – 15. This will allow companies to ensure customers continue to see improvements and receive a safe, reliable supply of drinking water. Key benefits of the investment will include:

Safe, reliable supplies
• Improve 140 water treatment works and 550 sewage treatment works to maintain and improve the environment and drinking water quality.
• Over 10,000km of water mains being improved or replaced – more than the equivalent of London to Cape Town.
• Investment in cleaning the mains pipe supplies serving more than one million people to help reduce discoloured water.

Protecting customers
• Extreme events such as flooding can severely disrupt water supplies. Almost 10 million people will benefit from investment to guard against them being without water.
• Addressing sewer flooding problems for more than 6,300 properties.

• Maintain or improve more than 3,000km of rivers to meet EU environmental standards, and improve water quality in more than 55 wetlands and bathing waters.
• More than 100 schemes to work with farmers and landowners. This will help control pollution and reduce costs by better use of land, preventing pollution of drinking water sources requiring costly treatment.

Saving water and using energy wisely
• By 2015, the water savings that companies will make by meeting water efficiency targets, reducing leakage, and increasing metering will amount to more than 100 billion litres per year. That is enough water to supply the cities of Liverpool, Bristol and Brighton for more than a year.
• Between 2010-15, companies are investing in renewable energy sources generating enough extra electricity to power around 90,000 homes. That is more than enough electricity for all the homes in Portsmouth. This will both help reduce carbon emissions and keep water bills down.

Last week Ofwat announced proposals to change the way it regulates the water and sewerage sectors to drive more efficient, customer-focused companies, and ensure more sustainable water use. The regulator also welcomed a report on the Draft Water Bill, which has identified potential benefits of £2 billion by changing the way water is managed.

Commenting on the need for change, Regina Finn said:

“There are longer term challenges if we are to continue to keep bills down. Unpredictable rainfall, and population growth in areas where water is already stretched, means we need to get better at managing and sharing our water. If we don’t, customers will lose out.

Our proposed changes, combined with recommendations in the Draft Water Bill, mean there is a total of £3 billion worth of benefit on the table for customers if we make the right changes. We cannot afford to stand still, if our water supplies are to remain both affordable and sustainable in the decades to come.”

a) Average bills for 2013-14 are estimates. They are based on provisional and forecast data that each company provides for the year ending 31 March 2014. The average household bill is, by definition, an average across all customers. Individual customers′ bills may be more or less than the average because of their particular characteristics, for example, whether they have a water meter. Changes to customers′ bills will vary according to which company supplies them. Some customers receive their water services from one company and receive their sewerage services from another. To calculate the average combined bill for these companies, you must add the average water bill to the average sewerage bill.

b) The change for Northumbrian - Essex and Suffolk is for water only bills, as they only provide water services.

c) In 2012 the three separate Veolia- branded businesses (Veolia Water Central, Veolia Water Southeast and Veolia Water East) were brought together as one company, under the Affinity Water brand. The above table reflects the fact there are three different sets of charges for the three different supply areas.

1. The inflation figure used is 3% - the Retail Price Index (RPI) annual inflation in November 2012, as released by the Office of National Statistics in December 2012.

2. For 2012/13 bills RPI annual inflation was 5.2%; in 2011/12 it was 4.7% and for 2010/11 it was 0.3%.

3. The national average bill figure for England and Wales of £388 does not factor in the Government Contribution to South West Water’s household bills. The national average bill figure therefore incorporates an average South West Water household bill of £549.

4. A total of £25.2 billion is forecast to be invested in maintaining and improving water and sewerage service between 2010 – 15. This figure is in 2011 – 12 prices.

5. The Water Services Regulation Authority (Ofwat) is the economic regulator of water and sewerage companies in England and Wales. It exercises its powers in a way that it judges will protect the interests of consumers, promote value and safeguard future water and sewerage services by allowing efficient companies to carry out their functions properly, and finance them.

6. Ofwat’s consultation ‘Setting Price Limits for 2015 - 2020 - framework and approach’ was published on 28 January and is available on www.ofwat.gov.uk

7. Further information about specific companies’ bills and charges will be available from the relevant water companies. Company contact details are available on: http://www.ofwat.gov.uk/industryoverview/today/map

8. Media enquiries to Ofwat Press Office on:

Benedict Fisher 0121 644 7642 / benedict.fisher@ofwat.gsi.gov.uk  
Harbinder Babra 0121 644 7616 / harbinder.babra@ofwat.gsi.gov.uk  
Simon Markall 0121 644 7696 / simon.markall@ofwat.gsi.gov.uk

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