UK water companies said to put ‘consumers above profits’

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The UK government has asked water companies to put ‘consumers above profits’ after industry admitted households would be asked to foot the bill for a £10bn investment program to cut sewage spills.

Ruth Kelly, head of industry trade body Water UK, acknowledged on Thursday that a proposal from water companies to increase investments to help prevent sewage spills over the remainder of the decade it would be paid for by customers through “modest increases to their bills”.

But Downing Street said on Thursday the government did not want households to shoulder the investment burden.

“We’ve always been clear that we don’t want things to disproportionately impact customers’ bills, especially since we know there are people up and down the country who are struggling with the cost of living, which is why we’ve provided the ‘We have help in that area,” he said.

The proposed increase in bills has yet to be approved by regulator Ofwat, which said it would “look into the details” as part of its usual process, which requires firms to submit their business plans by October. The final decision will be made by 2025.

Ofwat said it will consider whether the proposed a £10 billion investment were they new jobs or projects that companies had already been paid for, as well as how it fit with other needs such as an urgent need to fix leaking pipes.

“Water companies need to explain how their proposals will be funded, the proposed impact this will have on bills, and the expected return to shareholders and lenders,” the regulator said.

So far, only 60% of the £2.2bn that water companies could have invested in wastewater infrastructure by 2025 has been spent, according to Ofwat.

It has already tabled a proposal to frontload £1.6bn of spending originally planned for 2025-2030 to the next two financial years to reduce storm-induced wastewater spills.

Household bills rose 7.5% in April – the biggest increase in two decades – to an average of £448 a year.

It is not yet known what the impact on bills would be if the £10bn investment were agreed as it is set according to an Ofwat formula.

Shadow environment secretary Jim McMahon told Sky News that water companies should not pass the cost on to consumers. “We can’t let households shoulder the burden in a cost-of-living crisis because water companies still think they can continue business as usual.”

Sir Dieter Helm, professor of economic policy at Oxford University, said Water UK’s announcement was “more spin than excuse”.

“If they’re sorry for their many failures, I want to know what they’re going to do to fix it,” he said. “If the answer is that they’re going to get the regulator to approve another £10bn to be financed by customers, that doesn’t sound like an excuse. It seems like a very lucrative option for them.

All that says is if Ofwat throws us a little more money for customers, we’re going to make more.

Water companies paid £1.4bn in dividends last year, according to research in the Financial Times, prompting criticism from environmental campaigners who argue landlords should bear the costs of the improvements.

Ashley Smith of the Windrush Against Sewage Pollution campaign said investors should “get in their own pockets and become investors, not parasites.”