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Thames Water is appealing to the UK competition regulator for a review of the price increases it can charge customers over the next five years, as the UK’s largest water utility battles to ward off renationalisation.
Thames Water said on Friday that the level of bills stipulated by regulator Ofwat did not “appropriately support the investment and improvement” required for the utility to “deliver for its customers, communities and the environment for the next five years”.
The utility, which provides water and sewage services to about a quarter of the UK population, was allowed by Ofwat to raise bills by 35 per cent by 2030, less than the 53 per cent increase the ailing utility had asked for.
Its customers will see average household bills rise by a third to £639 from April, including inflation.
Sir Adrian Montague, chair of Thames Water, said: “We have taken the decision to refer our final determination to the Competition and Markets Authority in the interests of our customers and the environment.
“We are focused on putting the business on a long-term stable footing so we can succeed in our turnaround, and build and maintain an infrastructure that supports growth and can withstand the effects of climate change.”
The request for further bill increases comes at a perilous time for Thames Water, which is grappling with debts of nearly £19bn. The company is waiting to hear next week whether the courts will approve a £3bn creditor bailout to prevent it falling into the government’s special administration regime, a form of temporary renationalisation.
Half of the loan was conditional on a CMA challenge and still needs to be fully agreed with lenders.
Last week, a High Court judge criticised Ofwat and the government for failing to engage in court proceedings held to decide on an emergency loan for the utility.
Thames Water argues it needs the cash to cope with the company’s crumbling infrastructure. The company has warned that it has £18bn of ageing assets that pose “a risk to public safety, water supply and the environment”.
Most of its sewage treatment plants lack sufficient pipes and tanks to process enough effluent, according to new research published by the Financial Times this week, while thousands of south London households were left without water supplies this week.
The company is also being investigated by Ofwat for running behind on more than 100 environmental improvement schemes that were paid for by customers during the last five-year regulatory period and have yet to be delivered, as well as for paying excessive dividends in the past year.
However, any further bill increases will pile pressure on customers. Almost half of households in England and Wales struggled to pay for their water over the past 12 months, while more than 8 per cent of households — or 2.5mn people — were in payment arrears, according to research published by Ofwat last month.
Most water companies are yet to declare whether they will support Ofwat’s decisions on pricing and spending and have just a few days before the deadline.
To date, only the three publicly quoted water companies — Severn Trent in the midlands and its associate Hafren Dyfrdwy, South West Water and its associate Sutton and East Surrey Water, and United Utilities in the north-west of England — have accepted Ofwat’s determination, in addition to Dŵr Cymru Welsh Water.
Of the regional monopolies, this leaves the financially troubled Southern Water, plus Northumbrian, Yorkshire, Anglian and Wessex to declare their hand.
Appeals to the CMA have been rare since privatisation 34 years ago. However, four companies — Anglian, Yorkshire, Northumbrian and Bristol — appealed to the watchdog during the last regulatory negotiations in 2020 and won.
