Image description: water droplet falling from a tap. Image by Tim from Pixabay

Millions of households in England will have to pay even higher water bills than had previously been expected, after five water companies appealed to the UK’s competition regulator.

In December regulator Ofwat said average annual household bills could rise by 36% to £597 by 2030 to help pay for infrastructure investment. However, five companies – Anglian, Northumbrian, Southern, Wessex and South East – appealed to the Competition and Markets Authority (CMA) that the price rises set by Ofwat were not enough to deliver the needed investment in infrastructure.

An independent group of experts appointed by the CMA has now decided provisionally to let the companies collectively charge customers an extra £556m over the next five years, which is 21% of the £2.7bn that the firms had requested.

The changes will add 3% on average to those companies’ bills, on top of the 24% increase previously allowed. The CMA said the expert panel had largely rejected companies’ funding requests for new activities and projects beyond those agreed by Ofwat. However, the panel did allow more money for returns to investors, to reflect sustained high interest rates since the bills increases were approved.

Together the five water companies serve over 7 million household and businesses.

Will Thames Water also appeal?

The CMA group’s decision will also be carefully considered by Thames Water, Britain’s biggest water company with 16 million customers. Thames also appealed initially but then agreed to pause while the utility and its creditors negotiate with Ofwat over a restructuring plan to try to cut its debt burden and prevent it coming into temporary government control.

Thames is reportedly still considering asking for a further £4bn. Sources close to Thames Water had criticised Ofwat’s approach to the price determination, arguing that the utility needed much more cash to turn around its performance on pollution.