Proactive Investors - Thames Water, the largest water and sewage supplier in the UK, said it needs to hike customer bills over 50% in order to survive and improve its environment record.
In its response to regulator Ofwat’s 'draft determination' of prices and investment from 2025 to 2030, the privately owned utility submitted a proposal to lift average water bills to £666.50 per customer per year by 2030, representing a 52% increase from the £433 average in the current regulatory period.
Average prices would rise to £696, a hike of 59%, if Ofwat allows its extra spending plans.
Thames Water said its overall plan to spend £20.7 billion on improving its network will see "customer bills increase to fund much-needed investment" as it "cannot deliver everything for all stakeholders at pace and for the prices of the past".
It said the average monthly customer bill will have increased by £18.99 by the end of 2030 compared to what they pay today in real terms, or £228 over the whole year.
Chief executive Chris Weston said it was "a highly ambitious business plan for 2025-2030 based on customers’ feedback and insight".
"Our customers told us to focus on delivering safe and resilient water supplies, and address concerns over our overall performance including on customer service and dealing with wastewater."
He said the original draft determination proposed by Ofwat "would be neither financeable nor investible and therefore not deliverable" and "would also prevent the turnaround and recovery of the company".
"The money we’re asking for from customers will be invested in new infrastructure and improving our services for the benefit of households and the environment. They are not being asked to pay twice, but to make up for years of focus on keeping bills low."
He suggested that this focus on keeping bills low in the past had resulted in "structural underfunding" that led to "significant asset health challenges", ie problems with its waterworks and sewer systems, alongside a substantial increase in the group’s debt.
Struggles with paying off their mountain of debt led to two credit ratings agencies removing investment-grade status on its bonds, which resulted in Thames breaching the terms of its licence and being hit by enforcement measures earlier this month.
Chairman Sir Adrian Montague noted that Ofwat’s draft determination and the response from Thames are still early stages in the process - "there will be many subsequent stages".
The company also proposed introducing an improved social tariff for customers struggling to pay and increasing by nearly 70% the number of those who would benefit to 647,000 households.
What the plan aims to do
- Replacing over 570km of water mains
- Replacing 54,000 lead pipes
- Upgrading 150km of sewers to lower the risk of collapses
- Reducing the number of times sewage floods into properties by 16% as well as all other external sewer floods by 14%
- Reducing storm overflows 34% and reducing the total number of pollution incidents by 30%
- Opening the Thames Tideway Tunnel, London’s “super sewer”, with a third phase of improvements that will reduce sewer overflows by 95%
- Delivering a 21% reduction in leakage (based on a 2020 baseline)
- Reducing water use per person by 4%
- Targeting "robust" investment grade credit ratios and reducing average gearing below 75%