UK government to intervene in water tariff setting for the first time — The Guardian

The UK government plans to intervene unprecedentedly in the process of setting water tariffs in England and Wales. Environment Secretary Angela Eagle informed water companies of her intention to influence the next tariff review conducted by regulator Ofwat.

As The Guardian reports, the minister sent a letter to company executives and regulators. In it, she stressed that the new tariff review must deliver significantly better value for consumers’ money, although she did not impose a direct requirement to reduce bills.

Priorities for water companies

The government expects operators to invest in technologies capable of reducing costs, as well as to respond earlier to water leaks and wastewater discharges. The letter also addresses improving communication with communities and giving local residents and leaders greater influence over decision-making.

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The five-year tariff review process is traditionally conducted by Ofwat: the regulator examines companies’ business plans and determines how much they may charge consumers to finance investment and operating costs. According to the publication, the government had not previously intervened in this mechanism. The next review is expected to be completed in 2029.

Background to the tariff review

The previous tariff review in 2024 approved a modernization program worth £104 billion. A significant part of its funding is envisaged through annual tariff increases: average water bills are to rise by 36% in the second half of the decade. For Southern Water customers, the regulator approved an increase of 53% by 2030 — to an average of £642 per year.

In summer, several major suppliers also sought permission to additionally charge billions of pounds to cover capital expenditures and debt obligations. Sources at the UK Department for Environment, Food and Rural Affairs said that the current intervention would be the first in a series of future changes in the water sector.