The average bills will fall around 5% for water and waterwaste for customers across England and Wales.

The Water Services Regulation Authority Ofwat has finalised decisions that means the average bills for water and wastewater customers across England and Wales will fall by around 5%, before adjustments for inflation, between 2015 and 2020. This would see average bills fall by around £20 from £396 to £376.

Over the next five years, customers will benefit not only in lower water bills but also have improved levels of service. As companies are set to spend around £2000 for every household across England and Wales.

By 2020 customers will benefit from significant improvements in areas of service that really matter to them, such as by tackling leakage and promote water efficiency, there will be more than 370 million liters a day of water saved – enough water saved to serve all of the homes in Birmingham, Manchester, and Leeds. With a reduction in the time lost to supply interruptions -down on average 32%. 4,700 fewer properties flooded by sewer water and cleaner water at more than 50 beaches.

With around 760,000 people benefit from some form of financial support from their water company this figure will more than double to around 1.8 million by 2020. Companies are putting in place measures, such as social tariffs, which are forecast to help an additional one million people over the next five years.

The announcement from Ofwat includes the decision to lower further the weighted average cost of capital (WACC), which is the minimum rate of return that lenders or investors require to support investment in the sector. Since its initial proposal of a WACC of 3.85%, Ofwat has updated its decision to reflect current market evidence on required returns, resulting in a WACC of 3.74%.

Jonson Cox, Chairman of Ofwat said:

“This is an important step in maintaining customers’ trust and confidence in the water sector. We set out to deliver a challenging but fair outcome. We are requiring companies to meet higher service standards and deliver on their promises to customers. We are bringing down bills so customers can expect value for money, while investors can earn a fair return. Companies will need to stretch themselves to deliver much more with the same level of funding as in previous years. We will achieve more resilient infrastructure and better service as a result.”

Cathryn Ross, Chief Executive of Ofwat said:

“With bills held down by five percent and service driven up over the next five years, customers will get more and pay less. Where companies stepped up to do the best they could for their customers we did not need to intervene. But where companies fell short we stepped in to make sure customers get a good deal. Now the hard work begins. Companies will only build trust and confidence with their customers if they deliver. Those who do can look forward to fair returns, while those that don’t will be hit in the pocket and face a tough five years ahead.”

These new charges will come into effect in April 2015. Companies have two months in which to accept Ofwat’s final determination or seek a referral to the Competition and Markets Authority (CMA).

Final determination: average bill changes (excluding inflation)

All figures are in 2014/15 prices. Figures may not add up due to rounding

Changes to average annual combined bill for water and sewerage companies

Ofwat’s final determination

Companies’
2013 December
request

2014-15

2019-20

5 year change

5 year change

National average bill (England and Wales)

£396

£376

-5%

-2%

Anglian

£431

£390

-10%

-8%

Dŵr Cymru

£440

£416

-5%

-4%

Northumbrian
(including Essex & Suffolk)

£388

£382

-1%

0%

Severn Trent

£333

£316

-5%

-4%

Southern

£437

£403

-8%

-2%

South West*

£545

£506

-7%

-4%

Thames**

£370

£353

-5%

3%

United Utilities

£410

£398

-3%

0%

Wessex

£485

£442

-9%

-4%

Yorkshire

£373

£361

-3%

-1%

 

Changes to average annual water bill for water only companies

Ofwat’s final determination

Companies’
2013 December
request

 

2014-15

2019-20

5 year change

5 year change

Affinity

£176

£163

-7%

-4%

Bristol

£202

£160

-21%

1%

Dee Valley

£152

£149

-2%

8%

Portsmouth

£97

£96

-1%

-1%

SembCorp Bournemouth

£153

£134

-12%

-6%

South East

£201

£194

-3%

3%

South Staffs
(including Cambridge)

£141

£135

-4%

2%

Sutton and East Surrey

£186

£180

-3%

-5%

* The average combined customer bill for South West does not reflect the £50 per customer Government contribution towards household bills. This addresses the significant investment needed in the infrastructure which was inherited by the company at privatisation to meet environmental and drinking water quality standards.

** Thames Water’s figures includes the costs for the preparatory works to build the Thames Tideway Tunnel – a 25km sewer to deal with the problem of too much sewage overflowing into the River Thames. However, it does not include costs for the construction of the tunnel. This is because the project will be financed and delivered by an independent infrastructure provider (IP). The IP is due to be appointed in 2015.