South West Water will spend £3.2bn on improvements - as campaigners say money should come from profits not higher bills
The company has given an update on its plans, following today's decision by the water regulator to allow firms to raise bills
Last updated 19th Dec 2024
Household water bills in England and Wales will increase by an average £31 a year over the next five years, regulator Ofwat has announced.
The increase is significantly higher than the expected average rise of around £20 a year per household, outlined in the regulator's draft proposals in July.
Ofwat said the increase would pay for a £104 billion upgrade of the water sector to deliver "substantial, lasting, improvements for customers and the environment".
However, despite the average £31 a year increase figure, households will face a heavy average hike of £86 or 20% in the next year, excluding inflation, with smaller percentage increases in each of the next four years.
The average bill will rise by a total of £157 or 36% over the next five years.
South West Water's been told it can hike household bills by 23 percent over the next five years adding £22 a year to a typical bill by 2030 - with suggestions that will leave customers paying £610 annually, up from £497.
In May South West Water confirmed a 3.8% shareholder payout increase - after confirming profits had increased by 8.6% to £166.3 million in the past financial year - despite a record-breaking £2.2 million of fines by Ofwat for illegal sewage spills across Devon and Cornwall. The pay packet for the chief exec role also increased in 2023-24 from £543,000 to £860,000.
The water firm (see statement below in full) says it will make 'record levels of investment' of £3.2bn across the South West, Bristol, Bournemouth and Sutton and East Surrey for the period 2025-2030 'securing safe, clean drinking water, reducing the use of storm overflows across the regions’ bathing waters and protecting the environment, with investments in renewables'.
Devon sea swimmer Jo Bateman, 63, is currently trying to take legal action against South West Water after pollution incidents prevented her from enjoying her hobby. She said; "The plan to hike water bills is totally unacceptable to me.
"All the water companies will be hiking their bills and it's just wrong when they've been paying out literally billions of pounds in dividends."
A separate town-wide legal challenge is also being considered after a pollution incident on the beach at the height of the tourist season
Ms Bateman added: "South West Water in particular is one of the worst performing of all the water companies because of its failure to invest in infrastructure. In 2023 they dischared sewage into our waters for over half a million hours, more than in 2022.
"I think the only answer is to re-nationalise, that won't solve all the problems immediately but it just seems to be fundamentally wrong that the water companies can be paying out all these billions. How can an essential service be run for profit where the end users are effectively subjected to a monopoly? I have no choice where I get my water I have to have South West Water."
Some firms have been allowed significantly higher increases. Southern Water customers will face a 53% increase and Severn Trent households will see their bills rise by 47%, before inflation.
Tom MacInnes, director of policy at Citizens Advice, said: "These price rises will hit many households hard. While it's encouraging to see help for customers increasing, the current dysfunctional approach to bill support in this industry means that people will continue to miss out.
"We found that more than two fifths (42%) of those likely to be eligible aren't aware that water social tariffs exist. The Government and suppliers must work together to ensure that no one is missing out on the support they're entitled to."
What has the water regulator said?
Ofwat chief executive David Black said: "Today marks a significant moment. It provides water companies with an opportunity to regain customers' trust by using this £104 billion upgrade to turn around their environmental record and improve services to customers.
"Water companies now need to rise to this challenge, customers will rightly expect them to show they can deliver significant improvement over time to justify the increase in bills.
"Alongside the step up in investment, we need to see a transformation in companies' culture and performance. We will monitor and hold companies to account on their investment programmes and improvements.
"We recognise it is a difficult time for many, and we are acutely aware of the impact that bill increases will have for some customers. That is why it is vital that companies are stepping up their support for customers who struggle to pay.
"We have robustly examined all funding requests to make sure they provide value for money and deliver real improvements, while ensuring the sector can attract the levels of investment it needs to meet environmental requirements.
"This has seen us remove£8bn of unjustified costs compared with companies most recent requests. In addition, our approach to setting a rate of return has saved customers £2.8 billion."
What has the water industry body said?
Industry body Water UK said: "After a decade of cuts Ofwat has finally listened to public anger and agreed a much-needed quadrupling of investment in our aging infrastructure.
"This will be the largest amount of money ever spent on the natural environment, and will help to support economic growth, build more homes, secure our water supplies and end sewage entering our rivers and seas. Each water company will now need to take time to assess what Ofwat's decision means for them.
"We understand increasing bills is never welcome. To protect vulnerable customers, companies will triple the number of households receiving support with their bills to three million over the next five years."
What has the Government said?
Environment Secretary Steve Reed said: "Under the Conservatives, our sewage system crumbled. They irresponsibly let water companies divert customers' money to line the pockets of their bosses and shareholders.
"The public are right to be angry after they have been left to pay the price of Conservative failure.
"This Labour Government will ringfence money earmarked for investment so it can never be diverted for bonuses and shareholder payouts. We will clean up our rivers, lakes and seas for good."
What has the Consumer Council for Water said?
The CCW warned the increases were "more than what many people can afford".
Chief executive Mike Keil said: "These bill rises may be less than what water companies wanted but they are still more than what many people can afford.
"Customers will be hit particularly hard from April with a large chunk of these increases frontloaded into next year - on top of inflation.
"We know at least two in five households will find these increases difficult to afford but the support being offered by some water companies lacks ambition.
"People want to see more investment, but this must be coupled with a strong safety net for customers who will struggle to pay.
"The case for a single social tariff to end the current postcode lottery of support has never been more compelling."
What has South West Water said?
Pennon has confirmed plans to deliver what matters most to customers and communities for the period 2025-2030, with record levels of investment across the South West, Bristol, Bournemouth and Sutton and East Surrey. The £3.2bn investment will see further improvements across the main customer priorities – securing safe, clean drinking water, reducing the use of storm overflows across the regions’ bathing waters and protecting the environment, with investments in renewables.
Bills for customers are forecast to increase for water services by £4 per month, and for sewerage services by £5 per month, one of the lowest increases across the Sector. At the same time, the Group is announcing a £200m support package to make sure those customers who need assistance, get the right help, to pay their water bill, as it extends its pledge to end water poverty to 2030.
Susan Davy, Pennon CEO said “Today’s news from Ofwat means that we have been given the green light to invest a record £3.2bn level over the next 5 years. This is on top of the £1.2bn we’ve already invested in our assets recently. We’re serious about making a difference now and in the future - our customers rightly deserve to see real change which we are already delivering. At the same time, we’re here to support customers to use less water, save more money as we do more than ever to support anyone struggling to pay their bill."
The 4 Priorities
Water Quality and Water Resilience: We're investing in new treatment works, reservoirs, and addressing lead pipe issues to ensure clean and reliable water for all.
• Upgrading a third of water treatment works in Devon and Cornwall
• Reducing leakage on our networks to less than 10% and less than 4% on customer properties
• Creating a water grid to ensure all our strategic reservoirs are connected
• Investing in large reservoirs, starting with Cheddar 2 in Bristol
Tackling Storm Overflows and Pollution: We pledge to eliminate storm overflows at bathing and shellfish waters by 2030
• Tackle every bathing beach by 2030
• Building trust in our bathing water quality with a commitment to a sampling a monitoring programme
• Taking a ’Green First’ principle for tackling storm overflows
• Reducing pollution levels
Delivering for Customers and Addressing Affordability: Despite doubling our investment program, we're committed to keeping bills as low as possible and supporting people through the cost-of-living crisis.
• Extend our zero-water poverty pledge to 2030
• Ensure fair charging for all our customers
• Accelerate smart metering, helping household customers use 5% less water
• Introducing a £200M affordability package to support our customers
Reaching Net Zero and Enhancing Environmental Gains: We're dedicated to achieving Net Zero by 2030, investing in climate-independent water sources, and strengthening our environmental efforts.
• Planting 300,000 trees to boost nature recovery, launching our 1,000 ponds initiative and a new £2m Nature Recovery Fund
• Recycling more waste and generating enough energy to power 20,000 homes
• Expand our award-winning Upstream Thinking catchment management programme to deliver 146,500 hectares by 2030