Water regulator Ofwat is bracing for a showdown with Britain’s water bosses over austere draft determination proposals published today.
Ofwat, in its five-yearly review of consumer bill prices and investment spending, gave UK water companies permission to raise bills by just 21% by 2030.
Though great news for consumers, this falls far below water firms’ wishes, sparking fears of a shortfall in much-needed spending on infrastructure.
In comments published by the BBC, David Henderson, chief executive of industry group Water UK, said Ofwat has “got this wrong”.
"This is an unrealistic and unfair decision from Ofwat, and our economy and environment will pay the price," he added.
Another spokesperson for Water UK called it "the biggest ever cut in investment," which is the complete opposite of Ofwat boss David Black’s declaration that the plans represent the “biggest ever” investment in the water sector.
As for the water firms themselves, most are still digesting Ofwat’s proposals.
Thames Water to respond
Thames Water said: “As part of its draft determination, Ofwat has asked us to look again at our turnaround plan, and is seeking enhanced oversight of our delivery against it.
“We are in any case taking stock of our turnaround plan under our new leadership and reflecting on our progress to date.
“We will consider all of Ofwat’s proposals as we go through this process.”
Ofwat was particularly severe on crisis-struck Thames Water, allowing the London water supplier to raise bills by barely half of what it wanted.
The regulator expects Thames Water to deliver a 19% reduction in leakage, an 18% reduction in phosphorus and a full 50% reduction in pollution incidents from average 2020-23 levels.
It wouldn’t be the first time that Thames Water contested a draft declaration.
When the regulator rejected its 2019 investment and pricing plans, Thames Water warned that “substantially reduced returns… would render the business unfinanceable”.
“In turn, this would have serious adverse consequences for our customers and the environment,” the company added.
Thames Water intends to publish its draft determination response after it has been submitted to Ofwat.
Severn Trent jubilant
South West Water owner Pennon Group PLC (LSE:PNN, OTC:PEGRY) said it “will now review both draft packages proposed by Ofwat”, a similar line forwarded by United Utilities Group PLC (LSE:UU.).
Severn Trent, on the other hand, responded to Ofwat’s draft determination with jubilation, given that all 13 of its business proposals got the green light.
“It is pleasing that, in its assessment, Ofwat agreed that Severn Trent has set an ambitious level of performance for the period ahead, as we work towards delivering the best possible service for our customers,” Severn Trent said in a statement.
All water firms have until 28 August to come back to Ofwat with revised proposals.