Water bosses warn plans to cap bills will reduce industry's ability to tackle sewage leaks

ITV News Correspondent Sejal KariaI explains why Britain's water companies are telling regulators that if they can't put their bills up, their sewage leaks will get worse, not better

Water bosses have warned plans to introduce a regulatory cap on bills will hold back firms’ ability to stop sewage leaks.

Industry trade association Water UK said regulator Ofwat’s draft plans to limit the rise in household water bills to £19 a year on average would hold back the investment needed to overhaul Britain's creaking water infrastructure.

The warnings come just weeks after Ofwat revealed £168 million of proposed fines for three of England’s biggest water companies for failing to manage sewage spills, including a £104 million penalty for troubled Thames Water.

The company has said it needs to hike customer bills by up to nearly 60% by 2030 or warned it will become “uninvestible”.

Yorkshire Water faced a £47 million penalty while Northumbrian Water faced a fine for £17 million after a “catalogue of failure” in the first batch of results from its biggest ever investigation into the industry.

In a letter to Ofwat chief executive David Black on Wednesday, Water UK boss David Henderson wrote: “Ofwat’s approach would make it impossible for the water sector to attract the level of investment that it needs and will reduce the UK’s attractiveness to international investment.”

Ofwat proposed in its draft determination in July that water firms should be allowed to increase bills by a third less than they had requested on average.

Wednesday marked the deadline day for firms and other stakeholders to respond to Ofwat’s initial proposals, which determines the sector’s bill increases, spending plans and returns for investors over the five years to 2030.

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Water firms had put forward plans for increases averaging £144 over five years, although there were significant variations in price changes between suppliers.

Ofwat said its proposals to cap the average bill increase at 21% – around £19 per year – follows firms’ proposals to increase their total spending by £29 billion, split between a £5 billion increase in the core costs for running their business and a £24 billion rise in spending to meet requirements set by governments and for other environmental improvements.

Ofwat said at the time that its scrutiny of companies’ cost proposals, to ensure they deliver efficiently, had led to a £16 billion reduction.

But there has been mounting public and political fury around firms’ polluting of waterways with sewage spills as they continue to hand dividends to shareholders, and bonuses to executives – something which Labour has pledged to clamp down on.

Sewage spills into England’s rivers and seas more than doubled in 2023.

According to the Environment Agency, there were 3.6 million hours of spills last year – equal to about 400 years – compared with 1.75 million hours in 2022.

A Water UK-commissioned report by consultancy Oxera, which is being published on Wednesday, warns over the impact on the sector of the Ofwat plans.

It said: “Ofwat’s draft determinations would likely result in significant investability issues for the sector as a whole.

“In particular, there is a material risk that the sector is unable to raise the new equity investment required to finance the proposed investment programme.”

The report added: “This would hamper the sector’s ability to deliver the environmental and service improvements expected of the sector by its consumers and other stakeholders, and would not be in the public interest.”

Ofwat said it will consider all responses “carefully” ahead of its final decision on water firms’ spending plans by December 19.

A spokesman said: “We expect to receive responses from many organisations, including water companies, customers, environmental and consumer organisations and investors.

“These are likely to reflect a diverse range of views on the proposals we have made.”

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