They will be allowed to impose ‘surge pricing’ and factor ‘water scarcity’ into bills to cut consumption when supplies are needed most as wildfires rage across tinderbox Britain
Britain erupted in fury after it was revealed failing water companies will be free to ramp up prices during droughts. Under plans backed by the Government they will be allowed to impose ‘surge pricing’ and factor ‘water scarcity’ into bills in a bid to cut consumption.
Prices could change based on the time of year and go up if consumers pass a certain usage. The plans – set to be given final approval by regulator Ofwat shortly – would require households to have smart meters.
Details emerged days after a drought was declared across three-quarters of Britain. More than 27 million people are subject to hosepipe bans while wildfires rage. Utility companies are already under fire over rising bills.
They have been accused of splashing out cash on bonuses, dividends and salaries instead of investing in infrastructure improvements to cut leaks, safeguard supplies and stop sewage spills into waterways.
Water campaigner Feargal Sharkey, the former Undertones singer, said suppliers were ‘once again’ penalising consumers for their own failures. He said: “For 40 years these companies have had legal obligations to help consumers to reduce their demand and they have failed at that comprehensively – just as they’ve failed to keep our rivers clean and failed to deal with our sewage.
“Now they’re going to penalise consumers for that failure. We’ve all been treated with contempt and forced to pay for our own exploitation for decades. Ofwat is once again doing nothing to rein in an industry that is clearly out of control.”
The move sparked outrage from billpayers who pledged to start a petition to block it. “Petition please,” demanded one online. Another wrote: “Surge pricing by water companies risks making households pay again for infrastructure failures they did not create.”
Another raged: “A national resource being managed for profit at the expense of the population. It’s an ongoing disaster.”
One more said: “Bonuses and shareholders’ dividends should only be paid if the water companies meet a set annual target of water leaks and sewage spillages. Only then can they consider increasing water bills during the summer periods of drought.”
“My water company put prices up by 32% in April. There are multiple leaks and regular discharges into rivers and the sea. They say the infrastructure needs updating. Yet they still managed to pay the CEO a £270,000 bonus. What for?”, asked another.
One asked: “Does that mean, conversely, that water companies will charge less when it rains? We should get a refund every time there’s a leak,” added another.
Suppliers could use their new powers in a multitude of ways. Under seasonal surge pricing customers may be charged more during the summer and less in winter. Tariffs could rise if customers cross a certain usage threshold.
Water chiefs claim surge pricing would create an incentive for households to save supplies at a time when experts are increasingly worried by the droughts hitting Britain. Last week five suppliers – Severn Trent, Southern, Thames, Wessex and South East Water – were granted permission by Ofwat to raise bills above previously agreed levels to support higher spending on improving infrastructure.
Prime Minister Andy Burnham accused water companies of treating consumers like ‘a blank cheque’. But Water UK, which represents suppliers, said as well as tackling leaks the industry needed to look at ‘rewarding people’ for using less through their bills.
During surge pricing trials in several parts of the country – including 14,000 Anglian Water households in Lincoln and Norwich – customers saw costs increase from £2.69 per cubic metre to as much as £4.39 from May to August. For the rest of the year they were reduced to £1.78 per cubic metre.
Vulnerable and poorer customers were excluded. About half of customers cut their water usage. Anglian Water is considering expanding the scheme. Seasonal and block-pricing have also been trialled by South West Water. Under block-pricing those using ‘essential’ amounts of water pay a basic rate while folk using more face higher costs. That would penalise households who use hoses or sprinklers to water their gardens.
Ministers want to cut the average consumption of water per person per day from 136.5 litres today to 122 litres by 2038. An Ofwat spokesman said: “The efficient use of water is in the best interests of everyone, including businesses. “The options we are progressing would support greater consideration of water scarcity and efficiency by water companies when setting their charges.”
A spokesman for the Department for Environment, Food and Rural Affairs said the changes – which could hit in April – would ‘make bills fairer and more affordable while encouraging greater water efficiency’. A Government spokesman said it was ‘committed to championing consumers and protecting households from cost of living pressures’.
“We have already ring-fenced money earmarked for new infrastructure so it can only be spent on fixing the problems and will go further by fundamentally reforming the water sector so that it works for the public, keeping bills as low as they can be,” a spokesman said. Water companies are trialling new charging structures which must, as promised, make bills fairer and more affordable while encouraging greater water efficiency.”