Ofwat has approved a £104bn upgrade for the water sector as part of its final determinations in the PR24 process, which sets investment plans, service commitments and bills for water companies in England and Wales for the 2025-30 period.
· Investment set to quadruple – nearly 90% of this will go to meet new requirements set out by the Environment Agency, Natural Resources Wales and the Drinking Water Inspectorate
· Almost £12bn allocated to cutting spills from storm overflows by 45% by 2030, from 2021 levels – more than £6.5m investment per day over the PR24 period
· £2bn development funding to kickstart £50bn investment for the biggest programme of water supply projects in decades. In total, 30 major infrastructure projects will build greater resilience to drought by providing enough water to meet the daily needs of around a third of England and Wales’ population
· Bills set to increase by an average of £31 each year over the next five years; a doubling of support for customers in need of a helping hand
· Claw back mechanism to ensure money not spent on investment by companies is returned to customers through lower bills
David Black, Ofwat Chief Executive, said:
“Today marks a significant moment. It provides water companies with an opportunity to regain customers’ trust by using this £104bn upgrade to turn around their environmental record and improve services to customers.
“Water companies now need to rise to this challenge, customers will rightly expect them to show they can deliver significant improvement over time to justify the increase in bills. Alongside the step up in investment, we need to see a transformation in companies’ culture and performance. We will monitor and hold companies to account on their investment programmes and improvements.
“We recognise it is a difficult time for many, and we are acutely aware of the impact that bill increases will have for some customers. That is why it is vital that companies are stepping up their support for customers who struggle to pay.
“We have robustly examined all funding requests to make sure they provide value for money and deliver real improvements, while ensuring the sector can attract the levels of investment it needs to meet environmental requirements. This has seen us remove £8bn of unjustified costs compared with companies most recent requests. In addition, our approach to setting a rate of return has saved customers £2.8bn.”
The 2024 Price Review (PR24) final determinations will see a quadrupling of new investment over the next five years, providing companies with the funding needed to transform performance, ensure supplies for future generations and to deliver cleaner rivers and seas.
Key elements of the investment package, which also reflect the UK and Welsh Governments’ stated priorities for the sector, include:
- £12bn on 2,884 projects reducing spills from storm overflows;
- £6bn of upgrades to combat nutrient pollution for around 1,000 sites and catchments;
- £3.3bn on nature-based solutions and increasing biodiversity;
- £2bn of development funding to unlock £50bn investment for 30 major projects designed to secure water supplies including nine new reservoirs and nine large-scale water transfer schemes;
- £456m of extra funding on day-to-day allowances to increase the rate at which water mains are replaced, with 8,445km set to be improved over the next five years.
The increase in investment needs is driven by delivering on the statutory standards and regulatory requirements set out by the Environment Agency (EA), Natural Resources Wales and the Drinking Water Inspectorate. These relate to a range of programmes such as reducing spills from storm overflows, improving wastewater treatment standards and raising further the quality of drinking water.
To help finance this essential investment programme, bills in England and Wales will increase by an average of £31 per year (36%) before inflation between now and 2030. This annual average increase compares with a £39 increase requested by companies in August 2024 (44%).
