Water companies in England and Wales are facing criticism for charging exorbitant refurbishment costs, leading to higher bills for consumers. An investigation by the water regulator has found that these costs are significantly higher than those in comparable countries.
The water regulator for England and Wales, Ofwat, is investigating claims that water companies are spending many times more on refurbishment projects than operators in comparable countries, leading to much higher bills. Campaigners have described this as a ‘rip-off,’ with experts arguing that the privatization of water companies has led to an overinflation of infrastructure costs.
Ofwat, officially known as the Water Services Regulation Authority, is a regulatory body in England and Wales responsible for overseeing the water industry.
Established in 1989, Ofwat's primary goal is to protect consumers by ensuring fair prices and high-quality services from water companies.
The organization sets price limits, monitors customer satisfaction, and enforces environmental regulations.
As of 2022, Ofwat regulates 13 water and sewerage companies in England and Wales, serving over 95% of the population.
Bills in England and Wales are due to rise £123 on average this year, and go up further over the next five years. This increase is necessary for companies to fix ageing sewage infrastructure and prevent spills of human waste from contaminating rivers and seas. However, several water firms have complained to the Competition and Markets Authority because they want the regulator to allow them to increase bills even further.
A report by the campaign group Windrush Against Sewage Pollution (Wasp) has found that upgrading a sewage works serving the Oxford area will cost £435m, more than 10 times the £40m cost quoted when the project was proposed. In comparison, it cost £29m to build a new sewage works in Assens, Denmark, where the cost of living is on average 13% above that of the UK and the cost of water and sewerage is one of the highest in Europe.
Paul Jeffrey, professor of water management at the Cranfield Water Science Institute, said that the industry’s privatization has led to infrastructure costs rising sharply. He stated: ‘There are several good reasons why the amount of money [the water companies] need to spend has risen sharply in recent years. The sector is privatised and is set up to allow companies to recover their investments given fulfilment of a tranche of performance metrics.’
Ofwat sources confirmed they were reviewing the data and said the regulator would ensure water companies delivered value for money when building new infrastructure. A spokesperson stated: ‘As part of this price review period, we’ll be keeping a much closer eye on the delivery of upgrades and infrastructure projects because of the vast increase in investment. That will include ensuring that they are value for money.’
Other companies in England appear to price their works similarly highly. For example, the Save Windermere campaign group found a 150-metre extension to a sewage outfall into the lake was estimated to cost almost £13m, or £85,470 per metre. Anglian Water is spending £400m replacing the Cambridge sewage treatment works, which will serve a population of about 260,000.
Ashley Smith from Windrush Against Sewage Pollution said: ‘Our research mainly covered Thames Water but the fact that the breathtakingly high prices claimed to pay for capital projects has not rung any alarm bells at Ofwat, where they just benchmark the companies against each other, suggests this is a national issue. When you look at the comparison between what you can get, for example in Denmark and the US, what you can buy with £435m, that cost can only be regarded as a rip-off.’
The investigation by Ofwat highlights the need for greater scrutiny of water companies’ infrastructure costs. With aging sewage infrastructure posing significant risks to the environment and public health, it is essential that regulators ensure these investments are delivered efficiently and effectively.
- theguardian.com | Ofwat investigating ‘rip off’ cost of water firms’ infrastructure works
