.svg)
Millions of households across England could face larger-than-expected increases in water bills, as the Competition and Markets Authority (CMA) prepares to issue a preliminary ruling on the sector’s investment and spending proposals as early as this week.
Five major water companies — Anglian, Northumbrian, Southern, Wessex, and South East — have appealed to the CMA, seeking approval to raise customer bills beyond the limits previously set by Ofwat, the industry regulator.
If the CMA allows the higher increases, it could pose an early political challenge for Emma Reynolds, the tenth environment secretary in as many years. The five companies collectively serve about 14.7 million customers, while Thames Water, the UK’s largest provider with another 16 million customers, initially joined the appeal but has paused its case while negotiating to reduce its massive debt and ensure its long-term stability.
Under the privatised water system in England and Wales, Ofwat determines how much companies can charge consumers over each five-year cycle. In December, Ofwat announced that average household bills could rise by 36% to £597 a year by 2030 to fund infrastructure upgrades. However, the six companies argue they need even more spending power to repair ageing networks, with the additional costs ultimately passed on to customers.
Industry insiders suggest that the CMA may be more inclined to permit higher spending, given the scale of required investment, although there are few clear indications of how the regulator will decide. According to S&P Global Ratings, water companies are seeking roughly £2 billion in additional investment on top of the £104 billion already approved for the next five years, but the agency noted significant uncertainty around the CMA’s stance.
The CMA had initially aimed to publish its provisional findings by mid-September but pushed the timeline to early October. Companies now expect the decision imminently, though it could be delayed further.
Martin Young, a former investment analyst and head of consultancy Aquaicity, said he expects “upward movement in the allowed spend” for Southern, South East, and Wessex Water due to the large disparity between what they requested and what Ofwat approved. He added that Ofwat’s assumptions on returns for investors — the cost of equity — were lower than those used by the energy regulator, Ofgem, and that the CMA might therefore raise the permitted level of spending.
“Given the challenges, the clear investment need, and comparisons with Ofgem, I wouldn’t be surprised to see increases,” Young noted.
However, another industry source warned that the CMA could face political pressure to avoid steep price hikes, especially as the government plans to replace Ofwat with a new regulator. Former environment secretary Steve Reed, now housing secretary, said in July that households should “never again” face the extreme bill surges seen last year.
At the Labour Party conference, Reynolds pledged that there would be “no more ripping off the British people,” while also promising investment that would benefit “jobs, consumers, and growth.” She has yet to outline how she intends to balance affordable bills with the urgent need for infrastructure upgrades to tackle leaks and sewage discharges, and reportedly postponed a planned meeting with industry leaders last week.
Meanwhile, Thames Water’s owners recently admitted that cleaning up river pollution could take up to 15 years due to the scale of necessary investment. A person involved in its restructuring accused Ofwat of having a “blinkered approach” to setting spending limits, and said the company might resume its appeal to the CMA if the government refuses to grant regulatory concessions — though that is not its preferred path.
A government spokesperson said: “This government inherited a broken water system, with crumbling infrastructure and sewage polluting our rivers. The public are right to be frustrated by rising bills, but we are taking action to fix the system and prevent future price hikes.”
