Thames Water has asked Ofwat to consider increasing the limits on the prices it can charge its customers.

Thames said that it has experienced changes to certain specific costs that were not anticipated by Ofwat, when price limits were last set in 2009 for the period 2010-15.

The regulator’s 2009 decision means Thames already has an allowance to increase its charges by 1.4% above inflation in 2014/15. Thames has indicated that this new application would add around a further 8% - around £29 - to the average household bill. The current average Thames household bill is around £354.

Regina Finn, Ofwat Chief Executive said:

“We know that household incomes are becoming ever more stretched – nobody wants to see any unnecessary increase in bills. We have made it clear to companies that we expect them to talk to their customers, listen to them and take account of their customers’ views.

“We will challenge these proposals and question the company strongly on their reasons. Proposed increases will only be allowed if they are fully justified.”

Thames say increases in its costs are because of increases in bad debt costs above what was allowed in 2009 price limits, specifically additional bad debt due to the economic downturn.

Other reasons for increasing costs include the impact of the transfer of private sewers; land purchase costs for the Thames Tideway Tunnel above what was allowed in 2009 price limits; and increases in Environment Agency charges above what was allowed in 2009 price limits.

Ofwat expects to make a final decision by November 2013. Any revisions to price limits would not apply to customers’ bills before April 2014.

Price hike is disappointing

The Consumer Council for Water (CCWater) has expressed disappointment over Thames Water’s plans to increase its prices next year.

Sir Tony Redmond, London and South East Chair of the Consumer Council for Water, said:

“Many other water companies absorbed the costs that Thames say they are facing – and they have done so without applying for a further price increase. We believe that Thames Water should do the same.”

Thames Water’s proposed increase of almost 13% comes at a time when household budgets are increasingly being stretched. Since early 2010 basic pay awards across the economy have been below inflation, with many people subject to pay freezes or pay cuts.

Sir Tony Redmond added:

“Our research shows that one in seven customers say they can’t afford their water bill.  This is reflected in an increasing number of customers defaulting on payments to their water company. Thames Water’s price hike will add to the problem.”