Even higher price rises on the horizon?

Every 5 years there is a review of water company prices and investment overseen by Ofwat the water regulator for England and Wales, this is called the Periodic Review. Companies submit their Asset Management Plans and their proposed price rises to Ofwat. Ofwat reviews them and produces an interim review. The companies revise their plans or provide clarification and resubmit, Ofwat reviews them again and produces a Final Determination. This is a take it or leave it offer to the water companies, and if they don’t accept it they can appeal to the Competition Market Authority (CMA).

This Final Determination came out in December 2024, allocating £104 billion spend, and allowing an average price increase for businesses of around 35% over 5 years. But on 18th February six companies decided to go to appeal. These are Northumbrian Water, Thames Water, Anglian Water, Southern Water, South East Water and Wessex Water. Their reasons for appealing mainly relate to their view that the Final Determination does not allow sufficient cash for the companies to operate, and/or does not provide the increased investment needed to maintain the resilience of the water and wastewater network in the face of climate change. These decisions were not taken lightly and were decided by the company boards. At the last Periodic Review (called PR19 after the year in which the Final Determination was made) Anglian Water, Bristol Water, Northumbrian Water, and Yorkshire Water all appealed and the CMA found in their favour and amended the Final Determination in their favour. However, the political situation and public mood now is very different to that in 2019/2020. A successful appeal will mean even larger prices rises for domestic and business customers in over half the country.

It remains to be seen how this will go down in the media and the court of public opinion, and even though the CMA is politically independent the political pressure will be intense, and also the reputational damage to the water companies may outweigh the financial gains. This will all play out over the next six months and possibly longer depending on the complexity of the analysis. In the meantime its business as usual, but if these companies win their appeals the price rises for business will be even higher than already announced. At The Water Retail Company we work closely with our customers on affordability and also on helping them use less water and produce less wastewater and we check they are always on the right tariff and are getting the right allowances. So if you are a business that’s concerned about price rises get in touch land lets see how we can help you.

More details can be found on these links to Ofwat announcements:
Price review 2024 – company appeals update – Ofwat
Competition and Markets Authority references – Ofwat