Water companies could be allowed to raise bills for customers during periods of drought under proposals being considered by the sector’s regulator for England and Wales.
Suppliers would be permitted to factor “water scarcity” into bills as part of efforts to reduce consumption under Ofwat’s plans, which are being likened to surge pricing – the practice where private hire firms raise taxi fares at times of higher demand.
The proposals come just a few days after the prime minster, Andy Burnham, said he was angry with water companies and accused them of treating their customers like a “blank cheque” after more than a dozen firms were given the green light to raise water bills even higher.
It emerged last Thursday that five companies – Southern Water, Thames Water, Severn Trent, Wessex Water and South East Water – would be allowed to raise bills more than originally planned before the end of the decade to allow for billions of pounds of extra spending on repairs and infrastructure.
The surge pricing proposals, first reported by the Sunday Telegraph, come after the 30 July conclusion of Ofwat’s consultation on changing the rules relating to wholesale charging, with the regulator due to share its final decision shortly.
Public anger over the behaviour of water companies has soared in recent years as bills have continued to climb even while sewage has flowed into the nation’s waterways and firms have increased bosses’ pay and handed out millions of pounds in dividends to shareholders.
Surfers Against Sewage, seen here in Brighton, England last year, are one of many protest groups who have taken aim at the water industry. Photograph: Charlotte Coney/Getty Images
During an exceptionally hot and dry summer, leading to almost three-quarters of England and all of Wales being declared officially in drought, suppliers have also come under fire for failing to save water lost through leaky pipes, which campaigners say far outstrips the amount that could be saved through a nationwide hosepipe ban.
An Ofwat spokesperson said: “The efficient use of water is in the best interests of everyone, including businesses. The options we are progressing would support greater consideration of water scarcity and efficiency by water companies when setting their charges, and encourage more tariff innovation.”
Several water companies have been carrying out charging trials over the past few years aimed at making bills more affordable and, potentially, reducing demand.
South West Water, which supplies water to about 1.8 million customers across south-west England, including Cornwall and Devon, is trialling a “rising block tariff”, where about 500 household customers are charged a cheaper rate for using a lower amount (or “block”) of water and progressively higher prices for higher consumption.
The company said 90% of its customers would see lower bills on this trial, according to its assessments.
skip past newsletter promotionFree newsletter | Every weekday
Sign up to Business Today
Get set for the working day – we’ll point you to all the business news and analysis you need every morning
after newsletter promotion
Anglian Water, which supplies 7 million customers across the east of England, the UK’s driest region, and South West Water are also trialling charging customers more for water used in the summer than in the winter months.
The Guardian understands there are no government plans for nationwide surge pricing for water bills.
A government spokesperson said: “Water companies are trialling new charging structures which must, as promised, make bills fairer and more affordable while encouraging greater water efficiency.”
They added: “We have already ringfenced money earmarked for new infrastructure so it can only be spent on fixing the problems, and will go further by fundamentally reforming the water sector so that it works for the public, keeping bills as low as they can be.”
Andy White, a senior lead for social policy at the Consumer Council for Water (CCW), a government-sponsored body that represents customers’ interests, said water companies were right to explore new tariff structures that could help manage demand and give customers more control over their bills.
He said: “Any new approach must be fair and protect customers who are already struggling with rising water costs. None of the schemes currently being trialled are designed to generate additional revenue for water companies, and many are structured so that most customers will pay less overall.”
White added that companies should give consumers smart meter data to give them a clearer picture of how they use water.
A spokesperson for Water UK, the industry’s trade association, said companies were working to cut down on leaks, adding: “We also need to consider whether we could help people save water by rewarding people through their water bill. This might include eliminating standing charges or expanding discounts for customers who save water.”
