Water bills ‘to surge up to 40%’ to fix sewage pollution crisis; Jeremy Hunt to meet regulators amid profiteering concerns – business live | Business

Darren Jones, the Labour MP who chairs parliament’s Business and Trade Committee, says the water regulator, Ofwat, has a case to answer over the problems in the industry.

Speaking to Radio 4’s Today programme, Jones says he is “increasingly sick” of seeing the same failings.

Jones explains:

We know that companies that are too important to fail must be regulated differently to other companies.

These regulators were set up, not just to try to keep consumer prices down after privatisation, in natural monopolies, but to ensure that the conduct of the owners and managers of these companies acted in the interest of the country and consumer.

And for too many years, decades even, we’ve allowed these companies to be operated with high risk stakes, with high levels of debt, with wealth being extracted from the companies, with investment not being high enough.

And then, once again, we’re in a situation where we’re being told that customers, taxpayers are going to have to pick up the bill for a failure of good corporate behaviour at these companies, and by the sounds of it poor regulation.

Q: Would renationalising this industry lead to a better result?

Jones says it’s an option, but not necessarily the right one.

The issue here isn’t about the ownership model, it’s about the conduct, he insists, and “the behaviour of the directors and the shareholders who own and operate these businesses”.

He cites debt levels, the cost of debt, the areas that the companies are putting their money into, dividends to shareholders,and executive pay as areas where water companies have had the wrong priorities. The energy industry has the same problems, Jones warns.

He says:

These companies have been allowed to not invest for the future, even though we know in many ways what we needed them to do for the future, and the regulators have allowed them to get away with it.

Elsewhere in the cost of living crisis, the energy regulator is proposing that new rules brought in to protect struggling prepayment meter customers should be a compulsory part of licence conditions for suppliers.

The voluntary code of practice, unveiled in May, bans forcibly installing prepayment meters (PPM) into the homes of people over the age of 85 and gives extra protections to vulnerable households.

All UK household energy suppliers signed up the code but regulator Ofgem said it now wants to make the voluntary arrangements “binding”.

It has also proposed that suppliers get compensated for a type of credit offered to the most vulnerable PPM customer, PA Media explain.

Neil Kenward, director for strategy for Ofgem, said:

“We are committed to ensuring robust protections are in place for vulnerable customers.

“The voluntary code of practice for prepayment meters enhanced protections, setting clear rules for when a prepayment meter is or isn’t acceptable, as well as new requirements around the installation of prepayment meters.

“We are now seeking to make these voluntary arrangements binding, and we welcome all views on this statutory consultation.”

Children’s minister Claire Coutinho has declined to comment directly on reports that the Government has been drawing up contingency plans to prepare for the possible collapse of Thames Water.

Coutinho told Sky News:

“I certainly think there are water companies like Thames Water which are in difficult positions, but I think our position as Government is to make sure that we have the right policies in place to see consumers protected but also that we’re dealing with things which are really important to the country, like dealing with the sewage leaks.

So what we’ve been asking companies to do is to make sure they’re putting forward investment plans and then what we’ve separately been doing is helping households with their family finances through cost-of-living support.”

In another worrying development, Sky News is reporting that the government has begun drawing up contingency plans for the collapse of Thames Water.

The news comes less than a day after the surprise exit of Thames Water’s CEO, Sarah Bentley.

Sky says there are “growing doubts” in Whitehall about the ability of Britain’s biggest water company to service its £14bn debt-pile.

One option could be to put Thames Water into a special administration regime (SAR), as happened with energy company Bulb in 2021.

Sky reports:

The talks within Whitehall, which involve the Department for Environment, Food and Rural Affairs (DEFRA), Ofwat and the Treasury, remain at a preliminary stage and relate at the moment only to contingency plans which may not need to be activated.

Thames Water serves 15m customers across London and the south-east of England, and has come under intense pressure in recent years because of its poor record on leaks, sewage contamination, executive pay and shareholder dividends.

Good morning, and welcome to our rolling coverage of business, the financial markets, the world economy, and the cost of living crisis.

UK households have been warned that their water bills could surge by up to 40% by the end of the decade, as companies look to pass on the cost of tackling the sewage crisis and fighting climate change.

The rises are due to be announced next year, The Times reports this morning, adding hundreds of pounds to average bills.

The move has apparently alarmed ministers, as they try to get to grips with the cost of living crisis, but water companies say they needed the extra money to meet strict pollution targets.

UK households have already been hit by the biggest increase to water bills in almost two decades.

But The Times reports that customers are going to be squeezed much harder, to fund investment plans to tackle the UK’s sewage crisis.

They say:

Under a process being run by Ofwat, England’s water companies have been asked to submit investment plans by October to fulfil commitments to tackle pollution from sewage. These include improving storm overflows discharging in or near designated bathing spots and improving 75 per cent of overflows discharging to high-priority nature sites.

Public consultation documents seen by The Times show that, to pay for the work, most companies are asking the regulator to approve real-terms price increases of, on average, 25 per cent between 2025 and 2030.

Southern Water, they say, plan to increase its charges to customers from £432 to a minimum of £677 by 2030, although it suggests the figure could be as high as £793.

Fresh from bringing in a hosepipe ban, South East Water, is planning to increase its bills by as much as 39% by 2030.

Wessex Water wants to put up its prices by 30%, while Thames Water is proposing rises of 20%.

Yesterday, Thames Water surprised the industry by announcing the sudden departure of chief executive Sarah Bentley, as the UK’s largest water utility struggles with its massive £14bn debt pile and battles to improve its environmental track record.

Also coming up today

Chancellor Jeremy Hunt will meet with the UK’s regulators to discuss the cost of living crisis, and whether firms are competing as they should.

The Treasury are concerned that companies are not passing on their easing cost pressure to consumers fast enough, undermining the government’s target of halving inflation by the end of the year.

Hunt is expected to ask the Competition and Markets Authority (CMA), and the watchdogs for energy, water and communications whether there is evidence of price gouging by companies and if so what they intend to do about it to help households.

Hunt will have “food companies, energy suppliers and banks in his sights”, the FT says.

As we reported yesterday, the UK’s largest mobile and broadband companies have been accused of fuelling “greedflation” after pushing through the biggest round of price hikes for more than 30 years.

We’ll also hear from the head of the Bank of England, Andrew Bailey, and its chief economist Huw Pill, as they attend an annual gathering of central bankers organised by the European Central Bank in Sintra, Portugal.

The agenda

• 7am BST: GfK’s German consumer confidence report

• 11.30am BST: ECB holds panel on “Lessons from recent experiences in macroeconomic forecasting”, including Bank of England chief economist Huw Pill

• 2.30pm BST: BoE governor Andrew Bailey appears on ECB ‘policy panel’, alongside ECB president Christine Lagarde, Fed chair Jerome Powell and BoJ governor Kazuo Ueda