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Water bills for millions of households will have to rise to pay for infrastructure improvements, the boss of the industry regulator has warned.
David Black, Ofwat’s chief executive, said the increases were needed to make improvements to the environment, amid rising anger at the industry over the dumping of sewage in rivers and large losses of water to leaks.
His comments will fuel campaigner concerns that consumers will now be on the hook for water companies’ £60bn debt binge since privatisation, which coincided with dividend payments of more than £70bn.
The industry has drawn up plans for annual bills to rise by about two fifths, or from an average of £450 to £680, plus inflation, according to consultation documents reported by the Times.
Mr Black also insisted that Thames Water, the supplier plunged into crisis by mounting debts and the departure of its chief executive, was still “a long way” from administration despite a scramble to raise more money from wary investors.
Speaking to BBC Radio 4’s Today programme, he said: “We expect companies will request increases in bills at the next price review to fund larger investment programmes and those programmes will deliver improvements to the environment.”
Asked repeatedly about whether it was right for bill payers to stump up more money after years of poor performance and lavish executive pay packages, Mr Black said “companies make mistakes”, adding: “In any sector, you get poor performing businesses.”
However, he admitted that large bonuses paid to water company bosses in the past “also anger me”.
“We have taken action to protect customers from paying for these pay packages and I am really pleased that more recently a number of these company chief executives have agreed not to take bonuses this year,” he said.
Thames Water is seeking to raise £1bn from investors, having already raised £500m, but Mr Black has warned that even this is unlikely to be enough.
And on Wednesday, he added that investors were “reluctant” to provide even the £1bn at the moment.
He said: “The question is for Thames, for their investors, to come forward with proposals to inject more equity into this business. And that’s where the situation is at the moment.
“The Thames Water company is talking to their investors about securing new equity.”
He insisted taxpayers would not ultimately be on the hook and that contingency plans to put Thames in special administration – or effectively nationalise the company – were unlikely to be necessary any time soon.
“That’s the backstop option… But we are still a long way from that position”, he said.
Thames currently has £4.2bn in “cash in the bank and access to credit”, he added. “So there is some time to sort out the issue.”
The company is looking for new money to be raised by the “early part of next year”, Mr Black said.