Ofwat has today finalised decisions which mean average bills for water and wastewater customers in England and Wales will fall by around 5%, before adjustments for inflation, between 2015 and 2020. This would see average bills fall by around £20 from £396 to £376.
At the same time customers will see improved levels of service. Companies are set to spend more than £44 billion or around £2000 for every household in England and Wales over the next five years. By 2020 customers will benefit from substantial improvements in areas of service that really matter to them, including:
The number of people benefiting from financial support will more than double to around 1.8 million by 2020. Currently around 760,000 people benefit from some form of financial support from their water company. Over the next five years, companies are putting in place measures, such as social tariffs, which are forecast to help an additional one million people.
Following direct engagement with a quarter of a million customers across England and Wales, companies submitted their plans to Ofwat in December 2013, proposing bills drop by almost 2% in real terms. Ofwat has worked with companies since then to deliver a further £3 billion savings for customers. This means average bills will be going down by 5% in real terms, and these savings will also help reduce bills after 2020. As well as challenging on price, Ofwat has also made sure companies are stretching themselves on service. This includes larger reductions in supply interruptions, pollution incidents, and further improvements to drinking water quality.
Ofwat’s announcement includes the decision to lower further the weighted average cost of capital (WACC), which is the minimum rate of return that lenders or investors require to support investment in the sector. Since its initial proposal of a WACC of 3.85%, Ofwat has updated its decision to reflect current market evidence on required returns, resulting in a WACC of 3.74%.
Jonson Cox, Chairman of Ofwat said:
“This is an important step in maintaining customers’ trust and confidence in the water sector. We set out to deliver a challenging but fair outcome. We are requiring companies to meet higher service standards and deliver on their promises to customers. We are bringing down bills so customers can expect value for money, while investors can earn a fair return. Companies will need to stretch themselves to deliver much more with the same level of funding as in previous years. We will achieve more resilient infrastructure and better service as a result.”