Water regulator Ofwat has today cleared the way for an £88bn infrastructure spending programme across the country.
The AMP8 spending agreement is £16bn lower than in water companies’ business plans after the regulator removed inefficient spending and activity where companies have already been funded.
Around £35bn will be channelled into reducing pollution and delivering greater water supply resilience. This more than trebles the level of investment in the 2020 to 2025 period.
The cost of this investment will initially be funded by shareholders or through borrowing, with these costs then recovered through customers’ bills over the 5-year period and beyond.
Ofwat has proposed a rate of return of 3.72%, above the level set for AMP7, reflecting increases in the cost of finance and the need to ensure the sector can raise the finance necessary to fund such a significant programme of investment.
The average bill increase for water and wastewater companies will be £19 a year over five years (£94 in total), above inflation.
Companies have been required to prepare for the future by setting their plans in the context of a 25-year delivery strategy.
These proposals include accelerating the delivery of £17bn of new water assets including 6 reservoirs, some of which are part of the wider programme of major projects; in total 9 new reservoirs are proposed.
David Black, chief executive, Ofwat 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.
“Let me be very clear to water companies. We will be closely scrutinising the delivery of their plans and will hold them to account to deliver real improvements to the environment and for customers and on their investment programmes.”
Protecting the environment
44% cuts in spills from storm overflows by spending £10bn and upgrading 2,500 storm overflows
£6bn investment in improving river water quality, including improvements at over 1500 wastewater treatment works – with around 880 removing more phosphorus
8 new performance targets for companies including reducing spills from storm overflows, reducing operational greenhouse gas emissions and improving biodiversity
Automatic penalties for companies failing to meet target
Securing supplies
£6bn for securing water supplies, including progressing 9 new reservoirs and 7 large-scale water transfer schemes
Requiring companies to replace around 8,000 km of water mains pipes – a 400% increase compared with the current 5-year period
Targetting companies to reduce leakage by a further 13%
Launching a £100m Water Efficiency Fund
Day-to-day delivery for customers
Tougher targets on internal and external sewer flooding, reducing sewer flooding in homes by 13%
Higher standards set for assessing companies’ customer service through comparing water companies with other sectors
