Water bills to rise by up to 20pc to beat sewage crisis

HOUSEHOLDS face a jump of up to 20pc in their water bills after Thames Water agreed a major investment deal to prevent sewage leaking into seas and rivers.

Thames Water said its owners have backed a plan to spend an extra £2bn between now and the end of 2025.

Rates are fixed for the next three years, but Thames Water bosses refused to rule out bills increasing thereafter to compensate private shareholders for their additional investment.

Thames Water originally agreed to spend £9.6bn on its business between 2020 and 2025, money that it will seek to recoup from bill payers. It has now increased this spending plan to £11.5bn, roughly a fifth more.

Sarah Bentley, chief executive of Thames Water, insisted that it was “not a given” that household bills would rise in three years’ time.

City sources, however, pointed out that Thames Water’s shareholders, led by an Ontario pension fund and the Universities Superannuation Scheme, would want to see a return on any money they pumped into the utility giant, which could mean that bills rise by the same amount they have invested.

If all of this increase is applied to customers’ bills it would drive the average bill for a three-bedroom house from £256.97 to £308.36.

Ms Bentley said: “The revenue from customers for this period [2020-25] is fixed. So bills don’t change.

“We have to go through a new process, along with the whole sector, of submitting a new business plan for the next five-year period. And Ofwat will then determine how much we should be charging in that period.

“For customers’ bills in the future, that will be decided through the price review process.”

To help fund the investment, shareholders in Britain’s biggest water company, which serves a quarter of the population, will invest an extra £500m into the company.

A further £1bn of equity funding will eventually be injected subject to certain conditions. Ms Bentley said that conditions included cutting leakage and reducing effluent pumped into rivers. The remainder of the investment will be funded by Thames’ existing reserves.