Londoners Face Big Hike in Water Bills to Fund Pipe Repairs

Londoners face an increase of at least 40% in water bills as the city’s beleaguered supplier plans £18.7 billion ($22.7 billion) of total investment to fix a crumbling network.

(Bloomberg) — Londoners face an increase of at least 40% in water bills as the city’s beleaguered supplier plans £18.7 billion ($22.7 billion) of total investment to fix a crumbling network.

Thames Water Ltd. is drawing up plans for costly repairs to aging tunnels and pipes to stem chronic leaks and sewage spills. The utility has been at the center of a crisis that’s roiled the industry this year as mounting calls from the public and politicians to stop releasing sewage into waterways coincided with soaring debt costs.

The company said Monday its 2025-2030 spending plan may bump up the average monthly bill by £14.55, which amounts to an increase of about 48% when compared with Thames’ plan for the previous five-year period. Based on current prices, the jump is about 40%.

Raising bills won’t sit easily with consumers grappling with a cost-of-living crisis. But seeking equity funding for the vast spending required is also difficult. While Thames investors agreed to put in £750 million in July to help stave off a temporary takeover by the government, more money is needed.

“Consumers shouldn’t have to foot the bills when water companies have paid out billions in dividends, dumped millions of gallons of sewage in rivers and seas and failed to invest for decades,” Gary Carter, national officer for the GMB union, said in a statement. 

Regulator Ofwat has already said water bills for households in England are set to rise 35% on average by the end of the decade. UK utilities plan to invest £96 billion in the five years to 2030 to expand and fix leaky networks, and have been submitting individual spending proposals to the watchdog for approval.

Thames and Southern Water Ltd. were named last week as the industry’s worst performers by Ofwat, which imposed penalties on both because of a failure to meet delivery targets.

Thames said its investment plan is “financeable” if no dividends are paid to external shareholders during the five-year period. Beyond a likely bill increase, and an indication of additional equity investments in the region of £2.5 billion, the company failed to specify how its proposals will be funded. 

Other UK utilities, including Severn Trent Plc, are also seeking to raise equity to help finance billions of pounds of expenditure. Anglian Water Services Ltd., operating in the east of England, said it’s concerned that Ofwat’s rules for the industry are unlikely to be sufficient to attract the necessary funds.

Cutting Leaks

Overall, UK utilities are seeking to triple investment in reducing sewage spills and cut leakage by more than a quarter by 2030, according to trade group WaterUK. Plans include 10 new reservoirs — the first in Britain to be constructed since 1991 — including a Thames Water development near Abingdon in Oxfordshire.

The regulator will scrutinize the spending proposals to ensure they deliver value for money and are adequately funded. It has told suppliers they won’t be allowed to use bill payers’ money to fix past mistakes. Final plans will be agreed by Ofwat in December 2024, with changes to bills taking effect from April the following year.

“This isn’t a done deal,” said Paul Vickars, a senior credit analyst at Bloomberg Intelligence. “It’s dependent on shareholders believing this plan is enough. Does it stop the leaks, stop the spills, stop the fines enough to steady the ship?”

The average annual bill in England will rise to £575 in the financial year 2029-2030 from £425, according to WaterUK. Companies will double the number of homes that are eligible to receive financial support.

–With assistance from Philip Aldrick.

(Updates with analyst comment in penultimate paragraph.)

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