Firms to face above-inflation increase in water bills from April

The business case for investing in water-efficiency measures looks set to strengthen after UK water regulator Ofwat last week announced an above-inflation increase in domestic water bills to take effect in April.

Under proposals approved back in 2004, domestic water rates will rise by an average of 1.1 per cent above inflation for the financial year 2009/10, resulting in an overall average increase of 4.1 per cent on households water and sewerage bills. The regulator said that the average household would see annual bills increase by £13 to £342.

A spokeswoman for Ofwat told BusinessGreen.com that while the April increases would initially only affect domestic users, business customers were in line to face similar above-inflation price hikes over the course of the year.

"Water bills for businesses in 2009-10 are likely to increase in line with rises recently announced by Ofwat for domestic customers, they are regulated in the same way," she said. "However there may be some minor differences with individual companies."

Ofwat and the water industry insist that the increases are needed to pay for improvements to the UK's water infrastructure designed to address climate change-related risks such as the increased incidence of flooding and droughts.

"Customers have told us that their top priorities are a reliable supply of high-quality drinking water, and an efficient sewerage service," said Pamela Taylor, chief executive at industry trade group Water UK. "The new charges will enable companies to continue to invest in a secure supply of high-quality drinking water and environmental improvements in spite of the credit crunch."

Before the end of this year, Ofwat is also due to rule on proposed price increases for the period from 2010 through to 2015 and industry experts are predicting that even larger price hikes could be on the cards as water companies attempt to fund climate change-related investments and cover an estimated £450m increase in costs related to tightening environmental regulations.

Last year, water utilities put forward draft spending and pricing plans for the five-year period that would see all the major providers apart from Welsh Water propose above-inflation increases in domestic and business bills.

Thames Water, the UK's largest water company, said it expected bills to rise by about three per cent per year above inflation between 2010 and 2015 as it embarks on a £6.5bn investment programme; while Northumbrian Water predicted bills would rise 1.3 per cent a year and United Utilities confirmed it was planning for above-inflation rises of 2.7 per cent a year