Water bills will have to go up next year, Thames Water boss admits
With 600 million litres of clean water lost through leaks every day and 8,000 sewage spills last year, ITV London's Sam Holder explains what has gone wrong for Thames Water
The head of Thames Water has said customers should expect their bills to go up next year as the struggling supplier upgrades its ageing infrastructure.
Joint-interim CEO Cathryn Ross made the warning as she was grilled at an Environment Food and Rural Affairs Committee meeting on Wednesday.
Thames Water - the UK's biggest water company, serving 15 million people - is fighting for its future amid a £14 billion mountain of debt, while facing higher interest rates due to inflation.
Its former chief executive, Sarah Bentley, stepped down abruptly last month amid mounting worries over the financial stability of the company.
In addition to its financial woes, Thames Water has also missed half of its performance targets, including on leakages, sewer flooding, pollution, blockages and customer usage.
Watch: Thames Water joint-interim CEO Cathryn Ross explains why water bills will have to go up
As ITV London arrived at a south London primary school for a different story - crew members discovered it was closed for the day as a huge leak outside meant its water supply had been cut off.
"It's baffling, isn't it? Because we have a huge company in Thames Water who get paid a lot of money to make sure the water infrastructure works," said Graham Voller, headteacher of Beecroft Garden Primary School in Lewisham.
"And yet, here we are today, we have to close the school because we've got no running water."
In just another example of Thames Water's failures, the firm was fined £3.3 million for pumping "millions of litres" of undiluted sewage into rivers near Gatwick Airport in 2017 - killing 1,000 fish.
This week Thames Water said shareholders agreed to provide another £750 million in funding - avoiding the possibility of nationalisation for which ministers were preparing.
But questions over the utility giant's future remain, as it has said it needs another £2.5 billion by 2030. The supplier said the initial funding agreement to the end of March 2025 was a "major milestone", although it admitted "significantly" greater support would be needed for its turnaround to be delivered.
When asked whether these higher payments could result in bigger bills for customers, Ms Ross, said: “No. There is no mechanism within the current price controls to enable us to put up bills to reflect higher interest payments.”
ITV London's Daniel Henry saw the impact of Thames Water's failures first hand as he visited a school whose supply was completely cut off
David Black, the chief executive of industry regulator Ofwat, added that Thames Water’s troubles have stemmed from its poor performance, which has held back its revenues, as well as higher costs - stressing that customers will not foot the bill for its woes through higher bills.
However, Ms Ross told MPs that customers should still expect their bills to go up next year for other reasons.
"There is no doubt that there is a substantial need for more investment in the sector as a whole, including in Thames.
"We've said repeatedly, we have an ageing asset base, we have assets that aren't as resilient as our customers and the environment would expect them to be.
"We also have a lot of new infrastructure that we need to invest in to meet the challenges of climate change adaptation and population change.
"That will need to be funded, and it is an unfortunate truth that the only source of ultimate funding for that in the current model is the customer."
It comes after Ms Ross suggested that higher-income households, particularly those with bigger gardens, could end up being charged more in order to pay for much-needed infrastructure.
'We're looking for proxies for relatively high income households,' she said in an interview to Bloomberg.
'One of those proxies might be big gardens, and therefore high levels of water use.'
Yesterday Ms Ross apologised to the environment committee for untreated sewage spills that happened under the company's watch, adding that the dumping of raw sewage into rivers was a "really complex problem to solve".
She told ITV London: "We are responsible for part of the pollution in our waterways and we need to stop discharging untreated sewage and we've got a programme of work that will deliver that."
Thames Water acknowledged its performance is not where it needs to be, after publishing its annual results on Monday.
However, the company attributed some shortcomings on external factors such as extreme weather and aging infrastructure as it published its annual results on Monday. Thames Water missed its water leakage target, hitting 602.2 million litres a day for 2022/23 based on a three-year rolling average. It said two weather events at opposite extremes in the space of months had a major impact on its network.
Another missed target was the amount of water customers used, which came to 146 litres a day per person. It comes as the government wants to reduce the amount of water people use each day from 144 litres on average to 110 by 2050, as England will need an additional four billion litres a day by that time to meet demand. Ministers also want water companies to cut leakage by half. Currently, 20% of the public water supply is lost this way. Elsewhere, Thames Water missed its target on pollution with the supplier saying storms in early 2022 and droughts had an impact on pollutant levels. Other missed targets include water quality, treatment works compliance, sewer flooding of homes and businesses, blockages and water supply disruptions. However, Thames Water significantly reduced sewage discharges – also known as storm overflows – by 46% compared with the previous year, although it attributed the decrease to dry weather last summer. It also met targets on areas such as acceptability to water customers, unplanned outages and sewer collapses.
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