Millions in England face higher water bills after regulator backs more price rises

Water bills for millions of households in England are to increase by even more than expected after the competition regulator gave the green light for five water suppliers to raise charges to customers – but rejected most of the companies’ demands.

An independent group of experts appointed by the Competition and Markets Authority (CMA) decided provisionally to let the companies collectively charge customers an extra £556m over the next five years, it said on Thursday. That was only 21% of the £2.7bn the companies had sort.

The five companies – Anglian, Northumbrian, Southern, Wessex and South East – together serve 14.7 million customers. The changes will add 3% on average to their bills, on top of the 24% increase previously allowed.

The companies appealed to the CMA in February for permission to raise bills by more than allowed previously by the industry regulator Ofwat. They argued they needed more money to meet environmental standards.

Water bills have become the subject of significant political controversy in recent years in the UK amid widespread disgust over leaks of harmful sewage into Britain’s rivers and seas.

Emma Hardy, the water minister, said: “I understand the public’s anger over bill rises – that’s why I expect every water company to offer proper support to anyone struggling to pay.

“We’ve made sure that investment cash goes into infrastructure upgrades, not bonuses, and we’re creating a tough new regulator to clean up our waterways and restore trust in the system.”

English and Welsh water companies are mostly privately owned, but the prices the local monopolies can charge customers are regulated by Ofwat over five-year periods. In December, the water regulator said average annual household bills could rise by 36% to £597 by 2030 to help pay for investment.

Ofwat said the companies could spend £104bn in total, paid by consumers.

The allowed bill increases stopped well short of the water companies’ requests. 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.

Anglian Water, which supplies the east of England and Hartlepool, asked for the average annual household bill to rise to £649, a 10% increase, but was granted £599, or 1%. Northumbrian, mainly in north-east England, asked for £515, or 6%, and was given £495, also 1%.

South East Water, which only provides drinking water and not sewage services in several of the home counties, asked for an 18% increase to £322, but was allowed 4% to £286. Southern Water, on England’s south-east coast, asked for a 15% increase to £710. That would have been the highest average bill in England and Wales, but it was allowed a 3% increase to £638.

Wessex Water in south-west England asked for an 8% increase to £642, and was granted the biggest proportional increase on appeal of 5% to £622.

The CMA and other regulators have faced pressure from the government to put more focus on economic growth, although people close to the bills appeal process said that did not factor in the decision. The chancellor, Rachel Reeves, this year appointed the former Amazon boss Doug Gurr to lead the competition regulator.

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Kirstin Baker, the chair of the group that decided on the appeals, said: “We’ve found that water companies’ requests for significant bill increases, on top of those allowed by Ofwat, are largely unjustified.

“We understand the real pressure on household budgets and have worked to keep increases to a minimum, while still ensuring there is funding to deliver essential improvements at reasonable cost.”

For affected households, the price increases will add to inflation on the cost of living. Mike Keil, the chief executive of the Consumer Council for Water, said further increases would be “very unwelcome”, and questioned whether the CMA should have allowed higher returns for investors.

“There is a danger the customers of these companies will end up paying more, without seeing any additional improvements in return,” he said.

Environmental groups have questioned why companies are allowed to return cash to shareholders while continuing to pollute Britain’s rivers and seas. James Wallace, the chief executive of the campaign group River Action, said: “Once again, water bill payers are forced to shoulder the cost of decades of failure.

“Millions of households in England face higher bills while rivers continue to suffer from mismanagement by privatised water companies. In 2024 alone, four of these five companies were responsible for at least 1.4m hours of sewage discharges into rivers and seas – a stark illustration of ongoing environmental harm.”

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 has agreed to pause it while the utility and its creditors negotiate with Ofwat over a restructuring plan to try to cut its debt burden and prevent it collapsing into temporary government control.

Thames is still considering asking for a further £4bn. People 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.