Experts warn water bills to spike from 2010

Businesses are being urged to instigate water saving measures ahead of " significant" increases in bills that experts predict are likely to take effect from 2010.

Water companies are bracing themselves for an estimated £450m of higher costs as a result of an overhaul of the licenses issued by the Environment Agency to firms pumping water from reservoirs, lakes and rivers. The Agency is currently reviewing the so-called abstraction licenses under the EU's new Habitats Directive and expects to find that up to 10 per cent of issued licenses may present a problem in terms of damage to water levels and wetland habitats.

The review, which is scheduled to be completed by 2010, will result in those licenses that present a problem having to be changed, with the amount of water firms are allowed to pump set to be reduced and some licenses revoked altogether.

"If a company operates a bore hole that impacts local wetland, for example, it will have to reduce the amount of water it pumps or close the bore hole," explained Tim Webb water resources manager at the Environment Agency. "In that case, the supplier may need to drill a new bore hole which can be a costly and time consuming process."

John Cuthbert, managing director of Northumbrian Water, said it was difficult to estimate the exact cost of any new infrastructure, adding that the impact would vary from supplier to supplier, with those water companies operating in the south east likely to bear the brunt of the cost.

However, he admitted that where water companies have to make changes to their infrastructure, costs are likely to passed on to customers. "It is difficult to generalise, because issues are likely to be location specific," he explained. " But if as a consequence of the habitat directive licenses are changed, it will result in additional capital costs and that will place pressure on prices."

The Environment Agency estimated that the total cost of the changes to licenses for water companies could run to £450m, while the Consumer Council for Water claims domestic customers will face price hikes of up to £30 a year in some areas.

Barry Clark, director of corporate communications at utilities trade group Water UK, predicted that business customers would also have to face up to higher water bills. He said that business customers represent around 30 per cent of water companies revenues and as such, any increase in utilities costs are likely to be passed on to businesses in the same way they will be passed on to domestic customers.

Experts agreed that the prospect of higher bills should encourage firms to invest in water saving measures. "This is a great opportunity to highlight the fact that water conservation makes sense for businesses," said Webb. "Even without the need to reduce abstraction to protect habitats, businesses can save money by cutting water use."

Cuthbert added that businesses that did seek to curb water use would also help mitigate the risk of future water shortages. "We know that with climate change taking effect, some areas of the country will face increased incidents of water scarcity," he said. "It will become more challenging for water companies to meet demand and in that context there is a strong case for water conservation."

The warnings come as government backed green business advisory body Envirowise released new research claiming businesses in England and Wales could save up to £9.4m a day by implementing water conservation measures. The agency has also released a new free initiative designed to help businesses adopt practices that can cut their water use by between 30 and 50 per cent.