On the water industry's £96 billion plan to clean up Britain's rivers

In the coming weeks, water utility executives will be answering questions from the public in a new series of “your water, your word” questions.

In previous sessions this year, held via video conference, chief executives from Thames Water, South West Water, United Utilities and others were asked to explain their poor performance in tackling leaks and river pollution.

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The questions will now likely focus on another highly controversial issue — why utility bills will rise.

Water suppliers are proposing to charge customers under plans to clean up Britain's rivers and coastlines. According to industry body WaterUK, there will be an extra £150 a year by 2030.

This means the typical English household's annual bill will rise from £425 to £575 in 2022/23 prices, documents show submitted to regulator Ofwat on Monday.

For this, customers are promised an “unprecedented” discount. £96 billion investment in water and sanitation infrastructure. The figure, according to suppliers, is almost double the total investment in the previous five-year period.

But critics question whether it will truly lead to the radical game change that the industry is talking about. This will happen, but due to the variety of reporting styles used by companies, the numbers are difficult to compare with each other.

Of course, in the past, suppliers have made many performance promises and failed to deliver on some of them.

0705 storm discharges, UK < p>There have also been more than 300,000 cases of storm spills, where untreated sewage is discharged directly into rivers and the sea as a «blow-off valve» when pipes fail to cope with heavy rainfall.

As Fergal Sharkey, the former Undertones frontman who now campaigns for clean rivers, says: «We've already paid these companies to design, build and maintain a sewerage system that can properly handle our wastewater.»

«So that I don't know why Ofwat would even agree to a customer paying again a second time for a service we never received.»

Ofwat, for its part, insists that consumers will only be asked to pay for “future investments, not for the company’s past mistakes.”

David Black, chief executive of Ofwat, promised the regulator would scrutinize the bills to ensure «any increase is justified, effective and delivers significant improvements in water quality in rivers and bathing waters.»

Typical annual bill for water in England and Wales last year was £417, including £199 for clean water supplies and £218. for sewerage services.

Since the water industry was privatized in 1989, suppliers have invested £200 billion in the network, according to industry body WaterUK. That's almost double the level before privatization.

WaterUK says leaks have also fallen by a third, levels of ammonia and phosphorus entering rivers have fallen by two-thirds and the number of beaches rated «excellent» has increased. seven times, and bills remained relatively low.

0310 Bills will increase

According to industry data published by Ofwat, two liters of water cost around 0.33p, compared to 45p if purchased from a supermarket.< /p>

But when you examine the industry's environmental performance, the figures are much less flattering. Water companies lose about a fifth of their supply to leaks each year, and periods of prolonged rainfall can overwhelm their networks and force them to release huge volumes of untreated wastewater into waterways.

Firms discharge wastewater into rivers and reservoirs. The sea operated for 1.75 million hours last year, with more than 300,000 storm spills recorded.

In July, Thames Water, Britain's largest water supplier, was fined 3. £3 million after admitting to polluting rivers in 2017. This is just the latest fine of several that the company has received in recent years.

And a month later, United Utilities was separately fined £800,000 for taking too much water from the environment by illegally taking 22 billion liters of water from boreholes in Lancashire, the Environment Agency said.

Chiefs The companies say their investments over the past 20 years have helped lower bills, while highlighting that much of Britain's water infrastructure dates back to Victorian times.

Monday's proposed bill increases are intended to address the problem. .

Bills will begin to rise from next year and will average £580 a year by 2030, according to an analysis of the company's plans reviewed by The Telegraph. This is up from the average of £417 for the 2022/23 season, or £163 more.

The lowest bill proposed was £518 per annum for Severn Trent and the highest for Co. Southern Water — £674 a year.

Thames Water, plagued by financial problems, said it expects to charge £611 a year by 2030.

Water companies' debt compared to the UK

However, due to the anachronistic way in which water companies present these figures, the figures do not take inflation into account and are based on 2022/23 prices, meaning bills in reality are likely to be even higher.< /p>

For example, Northumbrian Water, one of the few companies to provide inflation-adjusted estimates, said annual bills could rise to £464 a year without adjusting for inflation. But when adjusted for inflation, the figure has jumped to £561.

Suppliers are also willing to raise money through equity or take on additional debt to fund their improvement plans. Severn Trent on Friday unveiled plans to spend £12.9 billion between 2025 and 2030, including £5 billion on “improvement”, or modernization, of its network.

The company has raised £1bn directly from investors through a share sale and also plans to take on an additional £5.9bn of debt. However, of the borrowings, £3.8 billion is new debt, and £2.1 billion is for refinancing.

John Campbell, an analyst at Bank of America Merrill Lynch, noted the ease with which the company raised money from Shareholders offered «relative ease in funding Severn Trent's growth» in a note headlined: «The path is clear. We repeat “Buy.”

The company promises to cut stormwater spills by 30%, pollution by 30% and leaks by 16% over the next pricing period.

Monday's proposals also failed to clear up uncertainty surrounding Thames Water, a supplier that has been struggling with rising debts.

0310 Large payments

Thames raised £750m from investors in July but was struggling to raise £1bn. The company said its 2025-2030 plan would be viable if it did not pay dividends to shareholders, but did not provide details of how it would fund them beyond a proposed account increase and suggested it would seek to raise a further £2.5 billion from investors.

According to WaterUK, £96 billion will be spent across the industry between 2025 and 2030.

This includes £24.2 billion to improve the environment, including £11 billion to reduce stormwater flooding, £4.1 billion to tackle drought, £2.3 billion to improve resilience to reduce disruptions and £1.5 billion to improve water quality.

Suppliers will build 10 new reservoirs, lay pipes to move water from wetter to drier areas and develop 28 new wetlands. to help improve water quality and biodiversity.

Martin Young, a utilities analyst at Investec, says early signs are that water companies are responding to public criticism with plans that are «over the top.»

Many of the cost figures released so far are higher than Young modeled.

“Obviously that means the public will pay for it and the bills will go up,” he adds. .

Water company executives will have to find out exactly what households think about this when they meet with their customers in the next couple of months.