The water regulator said the company has been set ‘a much broader range of commitments to protect and improve the environment’
United Utilities(Image: Kenny Brown | Manchester Evening News)
Average household water bills in Greater Manchester and the north west are set to rise by £94 over a five year period, it was revealed today. It includes an average rise of £27 between 2024-25 and 2025-26, the Water Services Regulation Authority, Ofwat, said.
The regulator, meanwhile, said it expects United Utilities to ‘deliver a significantly improved level of service for customers and the environment’ – and outlined a series of key demands.
Ofwat said it has set UU ‘a much broader range of commitments to protect and improve the environment’. The company, which provides water and wastewater services across the north, has been told to do more to tackle storm overflow spills, leaks and external sewer flooding – and to reduce pollution incidents by 30 per cent. It must also deliver a 31 per cent reduction in the amount of phosphorus entering rivers, Ofwat said.
Sewage spills into England’s rivers and seas more than doubled in 2023. Ofwat said: “We expect United Utilities to deliver significantly better outcomes for our natural environment over the next few years and to meet its legal obligations: we want lower pollution, healthier rivers and waterways, and the company to do its bit to combat the effects of climate change.”
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Ofwat revealed UU wanted to charge its customers more for their water over the period. The average household bill for 2024-5 for customers is £442. UU’s proposed plan would see that figure increase to £556 in 2029-30, but Ofwat’s draft determination, published today, is costed £20 cheaper, at £536.
The proposals are part of the 2024 Price Review and cover the period from 1 April 2025 to 31 March 2030, ahead of a final decision at the end of the year. Ofwat said the average 21 per cent bill increase nationally, around £19 per year, follows firms’ proposals to increase their total spending by £29 billion, split between a £5 billion increase in the core costs for running their business and a £24 billion rise in spending to meet requirements set by governments and for other environmental improvements.
The regulator said its scrutiny of companies’ cost proposals, to ensure they deliver efficiently, had led to a £16 billion reduction.
It said its draft decision ‘allows United Utilities to collect £12 billion through bills from both households and businesses over the 2025-30 period’. “This will recover a share of the cost of historical expenditure, as well as a portion of the £12 billion expenditure planned for 2025-30,” said Ofwat
“Overall, this will increase average household bills by £94 from 2024-25 to 2029-30 for United Utilities customers, before inflation. This includes an average rise of £27 between 2024-25 and 2025-26. Because of our challenge on United Utilities’ costs and the speed that revenue is recovered from customers, average bills will be lower than those originally proposed by United Utilities.”
Ofwat said that over the period it ‘expects’ UU to reduce storm overflow spills by more than half and reduce leaks by 13 per cent
“The company is expected to use £213 million to supply smart meters to 900,00 household and business customers,” added the draft decision.
“Over 2025-30, United Utilities will be expected to reduce the duration of interruptions to customers water supply by 71 per cent, as well as a 26 per cent reduction in external sewer flooding. The company is allowed an additional £189 million to continue its programme to improve the taste, smell and appearance of its water.
“Overall, to deliver its performance commitments and legal obligations, our draft decision provides United Utilities with a total expenditure allowance of £12 billion over the 2025-30 period. This is £4.5 billion more than the company was provided with in the current price review period (2020-25).
“We consider that United Utilities can deliver its performance commitments and obligations for less cost than it requested, and our proposed allowances are 17 per cent lower than the company’s plan.”
United Utilities published its business plan for 2025-30 in October 2023. Ofwat said it has ‘scrutinised’ the company’s proposed costs ‘so that customers do not pay more than is necessary for the service they receive and are not charged twice for work which should have already been delivered’.
It said it has also ensured ‘the returns that investors earn reflect the performance delivered for customers and the environment’.
“Our draft decision means that United Utilities will be in a position to deliver the investment that is required. We have incentivised it to go beyond its performance targets to achieve even better outcomes for customers and the environment. We will hold the company to account to deliver real improvements for customers and the environment,” it said.
UU’s current performance was described as ‘average’ compared to other companies. In 2022-23, it was said to have been a ‘top performer’ in reducing pollution incidents. But Ofwat said it ‘performed worse’ than a target set for ‘performance in areas such as water supply interruptions and drinking water quality’.
“We view its business plan as displaying reasonable levels of ambition for its performance in 2025-30. Under our draft decision, we require United Utilities to deliver a significantly improved level of service for customers, and the environment,” it went on.
Ofwat chief executive David Black said: “Customers want to see radical change in the way water companies care for the environment. Our draft decisions on company plans approve a tripling of investment to make sustained improvement to customer service and the environment at a fair price for customers.
“These proposals aim to deliver a 44% reduction in spills from storm overflows compared to levels in 2021. We expect all companies to embrace innovation and go further and faster to reduce spills wherever possible. Today’s announcement also increases the resilience of our water supplies to the impact of climate change and will reduce how much water is taken from rivers by enabling a range of long-term water supply projects, which includes plans for nine reservoirs.”
Water firms can challenge Ofwat’s proposals and a final decision is expected later this year.